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The government is going to press ahead with its plans for privatising or selling the Royal Mail, following an updated review of the postal service.
Business secretary Vince Cable made the commitment after receiving an updated version of a report originally ordered by the Labour government calling for private investment.
The Hooper Report into the future of Royal Mail recommends that private sector capital should be introduced in the form of a sale or partial sale of the Post Office sector to a private investor.
Former Ofcom director Richard Hooper said the financial position at the Royal Mail had worsened since his first report, with the group's £10bn pension deficit more unsustainable.
The report found that the current system of funding was "unsustainable" and despite important steps on modernisation, the Royal Mail still lagged behind the leading postal operators.
Hooper said private funding was the only way to raise the cash needed to continue modernising the service.
The report recommended that the government takes on the pension deficit as part of the wider range of measures.
Cable said the Royal Mail faced a "combination of potentially lethal challenges" including declining mail volumes, low investment and a "dire pension position".
"We are determined to safeguard Royal Mail for the future and help it tackle these challenges," he said
"We will come forward with new legislation in the autumn. It will draw heavily on Hooper's analysis and recommendations and the government's wider objectives, including the need for employees to have a real stake in the future of the business."
The Business department said a Postal Services Bill is expected to be introduced next month, enabling the modernisation of Royal Mail, in partnership with employees, and will ensure it "benefits" from private sector capital and disciplines.
Under the coalition's plans, the Post Office will be retained in public ownership, with as much as 20 per cent could be given to its employees.
The Communication Workers Union (CWU), which has warned of industrial action to fight privatisation, said the report is "politically motivated".
General secretary Billy Hayes claimed privatisation would harm millions of small businesses, customers in rural areas and the post office network.
Hayes said: "Privatisation would be devastating for Royal Mail and the whole country's postal services. The universal service has been a key part of the UK post for 170 years but because it isn't the profitable element of mail, the privatisation will put it at risk."
The CWU recently commissioned a survey, together with Labour leadership candidate Ed Balls, which found that most people wanted the postal service to remain publicly-owned.
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