The Department for Work and Pensions (DWP) is set to gain powers to monitor bank accounts for signs of overpaid benefits. The Labour party plans to introduce a Fraud, Error and Debt Bill that could save an estimated £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 has clarified that it will not have access to view inside bank accounts and will not share personal information with third parties.
Banks will be tasked with checking the accounts of benefit claimants for savings levels that surpass the capital limits for means-tested benefits. They may also search for evidence of foreign transactions that suggest prolonged overseas trips that are not permitted, reports Birmingham Live. These are the existing rules regarding the amount you can hold in an account while claiming benefits:
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 indefinitely disregarded.
The Department for Work and Pensions (DWP) has clarified that there is a savings 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 will cease until the amount falls below this threshold.
Savings deductions from these benefits 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, over £6,000. These benefits are typically paid into accounts fortnightly. So, 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.
Pension Credit claimants can breathe a sigh of relief knowing that the first £10,000 of their savings won’t impact their payments from the Department for Work and Pensions (DWP). For every £500 above this threshold, it’s considered as £1 of weekly income, which is then subtracted from your Pension Credit.
There’s no ceiling on how much you can save to qualify for Pension Credit. For pensioners who get Housing Benefit to help with rent, the same £10,000 savings rule applies before it affects your claim. Each £500 over this limit is treated as £1 of weekly income.
However, if you’re receiving the guarantee credit part of Pension Credit, you can have savings over £16,000 without it impacting your Housing Benefit. But, pensioners who are jointly claiming Housing Benefit with someone under the State Pension age must heed the working age savings cap of £6,000 before it influences their claim.
The DWP takes a dim view of those attempting to shed excess savings to preserve their benefit entitlements. They’ll scrutinise such actions for what’s known as ‘deprivation of capital’ a move to dodge reductions or cessation of benefits.
‘Deprivation of capital’ is assessed individually and could involve transferring money, splurging on extravagant holidays or vehicles, investing in property, or shifting funds into a trust. However, settling debts or spending that is seen as “reasonable” won’t fall foul of the regulations.