DWP to check bank accounts with savings higher than these limits under new rules

The Department for Work and Pensions will be able to check people's bank accounts for savings over the legal limit under plans to recoup £1.6 billion over the next five years

The Department for Work and Pensions (DWP) is set to gain new powers to monitor bank accounts for signs of overpaid benefits.

The Labour government soon plans to introduce a Fraud, Error and Debt Bill, which will recoup a projected £1.6 billion for the public purse over the next five years. As well as granting the government new powers to combat fraud and recover debts, the legislation will also require banks and financial institutions to "share data that may show indications of potential benefit overpayments."

The DWP has clarified that it won't have access to view inside bank accounts, and will not share personal information with third parties. To identify overpayments, banks will scrutinise benefit claimants' accounts for savings levels that breach the capital limits for means-tested benefits. They might also search for evidence of any foreign transactions, indicating prolonged overseas trips that aren't permitted.

This is in line with the existing rules for the amount you can hold in an account while claiming benefits under its rules about capital. Capital is defined as any cash amount you own, 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, and workplace/personal pension pots are disregarded indefinitely.

The DWP has explained that there is a capital limit of £16,000 if you are claiming Universal Credit. If you have £16,000 or above saved up, then you are not entitled to the benefit until the amount is reduced below that threshold. Any income from savings, assets and investments - for example, interest on savings, rent you receive from properties you own or dividends from shares - is considered to be ‘capital’.

Capital with a value of £6,001 to £16,000 will also affect your Universal Credit. For each £250 above £6,000, your Universal Credit is reduced by £4.35 a month. This means if you have £6,300 in a savings account, £6,000 of it will be ignored and the other £300 will be treated as giving you a monthly income of £8.70. This is then deducted from your monthly Universal Credit payment.

People on income-based JSA, income-related ESA, Income Support and Housing Benefit lose £1 per week for every £250 or part of £250 in capital that is over £6,000. These benefits are normally paid into accounts every two weeks.