Several thousand expat Britons with Cypriot bank accounts have had their pension payments frozen to ensure they receive them ahead of a proposed bank deposit tax, Treasury minister Greg Clark has said.
Mr Clark told MPs the Government was putting pension payments on hold until "at least tomorrow" (Tuesday) to "ensure that any payments made by Her Majesty's Government to banks in Cyprus get to the intended recipient".
His statement came as the Cypriot government postponed a vote on the unprecedented one-off bank deposit tax, part of a wider bailout package, until Tuesday.
Cypriot banks will remain closed until Thursday, as Monday's bank holiday has been extended by two days, the nation's central bank said.
The Cypriot government wants time to amend the deal reached over the weekend, which will raid ordinary people's savings to partly fund a bailout package.
Unlike the previous rescues for Greece, Portugal, Ireland, and Spanish banks, the proposed Cypriot bailout is the first that dips into people's bank accounts to finance it.
In exchange for 10 billion euro (£8.6 billion) in rescue money, the government proposed a one-time tax of 6.75% on all bank deposits under 100,000 euro (£86,490) and 9.9% over that amount.
The bailout package, which has still to be finalised, involves the International Monetary Fund, European Central Bank and European Union.
But after prompting an outcry from depositors, the Cypriot government is now looking at changing the terms of the deal so small savers lose less, while big depositors pay more.
Mr Clark also reiterated the UK Government's commitment to compensate around 3,000 armed forces members stationed in Cyprus for "reasonable losses" incurred from the situation.