Last May the Payments Council delivered its first national payments plan which includes proposals for the "managed decline" of paper-based cheques.

During the public consultation the Council had suggested that cheques be phased out by 2018, but this was dropped in the final plan over concerns about the setting of an "end date".

Now the date has been set, says the Council, after deciding "that its active involvement can help prevent confusion and deliver cheque alternatives that are acceptable to cheque users".

Paul Smee, chief executive, Payments Council, says: "Customers aren't likely to see any immediate change as the target date is still a long way off. This announcement marks the start of extensive work that we need to do to ensure that everyone has a viable alternative, should the cheque clearing close. We aim to be very transparent and we will continue to consult fully with all interested parties."

Smee says a review will be conducted in 2016 to determine whether sufficient progress has been made to press ahead with the abolition by 2018.

With cheques costing around £1 to process, four times as much as electronic payments, the move could save banks hundreds of millions a year.

The decline of cheque use in the UK has been widely documented. In 2000 cheques represented a quarter of all non-cash transactions but by 2008 they accounted for only one in eleven. Compared with a peak of 10.9 million cheques issued per day in 1990, by 2008 there were just 3.8 million a day.

Supermarkets Sainsbury's, Morrisons, Asda and Tesco along with retailers Boots and Marks and Spencer, are either phasing out or have already stopped taking cheques.

However, Age Concern and Help the Aged have issued a statement warning the move will hit elderly people hard.

Andrew Harrop‚ head, public policy, Age Concern and Help the Aged‚ says: "Chip and pin is problematic for many older and housebound people and we know 6.4 million over 65's have never used the internet. Without cheques‚ we are very concerned people will be forced to keep large amounts of cash in their home‚ leaving them vulnerable to theft and financial abuse.

"We are being asked to take on trust that the banking industry will create an alternative people can use‚ but new forms of payment can take a long time to develop and no action has been taken to date."

The Council has sought to reassure older people, saying: "The goal is to ensure that by 2018 there is no scenario where customers, individuals or businesses, still need to use a cheque. The Board will be especially concerned that the needs of elderly and vulnerable people are met."