Ministers were under pressure to renew the arrangement because of concerns that the loss of POCA would put the future of as many as 3,000 post offices at risk.
MPs from all parties had been lobbying against suggestions that the operation of POCA could be switched to a private firm.
Rival company PayPoint said they were "disappointed by this decision".
Work and Pensions Secretary James Purnell told MPs he would do "nothing to put the network at risk.
"Far from being a reprieve, it is the continuing commitment from the government to support the Post Office network," he said of the decision."
The account was brought in to end the need for giros and payment books for pensioners and benefit claimants, while still allowing them to use post offices to collect money.