DWP's new bank account checks savings over these legal limits for benefit claimants

New powers are being given to the DWP to monitor bank accounts in a bid to fight benefit fraud sparking concern among many people

New powers for the Department for Work and Pensions (DWP) to monitor bank accounts are being introduced to identify any signs of benefits overpayments to those not entitled. Labour is set to introduce a Fraud, Error and Debt Bill, anticipated to save £1.6 billion over the next five years.

In addition to granting the government new powers to combat fraud and recover debts, the legislation will "require banks and financial institutions to share data that may show indications of potential benefit overpayments."

The DWP clarified that it will not have access to view inside bank accounts. It also said it will not share personal information with third parties.

To detect overpayments, banks will scrutinise benefit claimants' accounts for savings levels that surpass the capital limits for means-tested benefits. They could also search for evidence of any foreign transactions indicating prolonged overseas trips that aren't permitted.

These are the existing rules for the amount you can hold in an account while claiming benefits, reports Birmingham Live. Capital is defined as any cash amount you possess, including savings in any bank or building society account, as well as premium bonds, stocks, shares and the value of any property that isn't your primary residence.

Personal injury compensation is typically not counted for the first 12 months. Workplace/personal pension pots are disregarded indefinitely.

The DWP has clarified that there is a capital limit of £16,000 for those claiming any of these means-tested benefits: Universal Credit, income-based Jobseeker's Allowance, Income-related Employment and Support Allowance, Income Support, and Housing Benefit (if you are under State Pension age). If your savings exceed £16,000, your benefit entitlement ceases until the amount falls below this threshold.

Deductions from these benefits due to savings commence at £6,000. For Universal Credit claimants, any capital between £6,000 and £16,000 is considered as providing a monthly income of £4.35 for each £250, or part thereof.

Therefore, if you have £6,300 in savings, £6,000 will be disregarded and the remaining £300 will be treated as yielding a monthly income of £8.70. This amount is then subtracted from your monthly Universal Credit payment.

For those on income-based JSA, income-related ESA, Income Support and Housing Benefit, £1 per week is deducted for every £250, or part thereof, exceeding £6,000. These benefits are typically paid into accounts biweekly.

Hence, in these instances, if you have £6,300, you would lose £2 per week, resulting in a £4 deduction when the benefit payment is deposited into your account every two weeks.

When it comes to Pension Credit, the Department for Work and Pensions (DWP) won't count the first £10,000 of your savings. For every £500 you have above that threshold, it's considered as £1 of weekly income, which will then be deducted from your payment. There's no cap on the amount of savings you can have to qualify for Pension Credit.

Pension-aged individuals who are claiming Housing Benefit for their rent can similarly have up to £10,000 in savings without it impacting their claim. Each £500 over this limit is treated as £1 of weekly income.

If you receive the guarantee credit part of Pension Credit, your Housing Benefit won't be affected even if your savings exceed £16,000. However, for pensioners jointly claiming Housing Benefit with someone under the State Pension age, the lower working-age savings cap of £6,000 is applied before it affects their claim.

But be cautious, any attempt to purposefully decrease your savings to avoid reductions or cessation of benefits might lead you into trouble. The DWP could investigate if shedding assets constitutes what they term 'deprivation of capital' to bypass benefit tapering or termination.

Decisions about deprivation of capital are tailored to individual circumstances and can span from transferring money to others, indulging in significant expenditure such as luxurious trips or fancy vehicles, buying property, or shifting funds into a trust. Paying debts or making purchases considered "reasonable" falls within the permissible scope.