DWP bank account checks will look for savings higher than these legal limits

If you have more than the capital limits in your account, your benefits can be stopped

New powers for the DWP to monitor bank accounts will look for any signs of benefits being overpaid to those who aren't entitled to them. Labour is to introduce a Fraud, Error and Debt Bill that's expected to save £1.6 billion over the next five years.

As well as giving the government new powers to fight 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 pointed out that it will not have access to see inside bank accounts and will not share their personal information with third parties.

To check for overpayments, banks will be checking benefit claimants' accounts for levels of savings that exceed the capital limits for means-tested benefits. They could also look for evidence of any foreign transactions indicating extended overseas trips that aren't allowed. These are the current rules for the amount you can have in an account while claiming benefits.

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Capital is defined as any amount of cash you have to your name 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 being used as your main home. Personal injury compensation isn't usually counted for the first 12 months and workplace/personal pension pots are disregarded indefinitely.

The DWP explained that there is a capital limit of £16,000 if you are 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 you have £16,000 or above saved up, then your benefit entitlement stops until the amount is reduced below that threshold.

Deductions from these benefits for savings start at £6,000. For those on Universal Credit, any capital you have worth between £6,000 and £16,000 is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250. So 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.

Those on income-based JSA, income-related ESA, Income Support and Housing Benefit lose £1 per week for every £250, or part of £250, that's over £6,000. These benefits are normally paid into accounts every two weeks. So, in these cases, if you have £6,300 you would lose £2 per week, meaning £4 is deducted when the benefit payment goes into your account every fortnight.

If you are getting Pension Credit, the first £10,000 of savings is not taken into account by the DWP. Every £500 over that amount counts as £1 of weekly income which is then deducted from your payment. There is no upper savings limit for being entitled to Pension Credit.

For those of pension age who receive Housing Benefit towards their rent, you can have up to £10,000 in savings before it affects your claim. Every £500 over that amount counts as £1 of weekly income. If you are getting the guarantee credit element of Pension Credit, you can have more than £16,000 in savings without it affecting your Housing Benefit.

But if you are a pensioner claiming Housing Benefit jointly with someone who is below State Pension age, the working age savings limit of £6,000 applies before it affects your claim.

Anyone who tries to get rid of excess savings could find they are still considered to have the full amount. The DWP will look at whether offloading money is what's called 'deprivation of capital' just to avoid benefits being reduced or stopped.

Deprivation of capital is decided on a case-by-case basis and can include giving or transferring the money to someone else, spending large amounts on a lavish holiday or new car, buying a house or moving the cash into a trust fund. Paying off debts and any expenditure deemed to be "reasonable" is within the rules.

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