Password Authentication

I'm trying to set up postgresql to work with postfix MTA and dovecot
IMAP server.
I am editing the pg_hba.conf file to get postgresql to accept password
authentication for localhost.

i have entered the following into pg_hba.conf --

host   all   all   127.0.0.1/32   password

But this is not working and I'm getting the following error ---

root@charlie /etc/init.d # /etc/init.d/postgresql restart
 * Restarting PostgreSQL...
su: Authentication service cannot retrieve authentication info.
(Ignored)
postmaster stopped

Has anyone dealt with this authentication issue and can lend a hand.

Thank you for your time and patience.

Mike