Some 2,500 post offices are already earmarked for closure
A further 3,000 post offices may be forced to close, the National Federation of Sub-Postmasters has warned ahead of its annual conference.
NFSP General Secretary George Thomson said the branches would be threatened if the government removes their right to handle pension and benefit payments.
He called on ministers to award the contract to the Post Office.
A government programme is under way to shut 2,500 post offices as the existing network is said to be unsustainable.
Mr Thomson said 22% of the British population eligible for state pensions or benefits collected them from the Post Office, bringing in 4 million customers a week.
Without the contract to handle these payments, post offices would lose £200m of income forcing 3,000 more post offices to close over the next 15 months, he said.
"It would be an absolute disaster for the British post office network, and for the public and post-masters," he said.
Earlier this year, the Conservatives narrowly lost a bid to prevent the planned closure of 2,500 sub-post offices.
Prime minister Gordon Brown had told MPs he wanted to see good post office services in every part of the country, but argued that the organisation was losing £500,000 a day.