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The Department for Work and Pensions (DWP) is set to receive new powers to monitor bank accounts in a bid to identify any signs of benefits overpayments to those not entitled. Labour plans to introduce a Fraud, Error and Debt Bill, which is expected to save £1.6 billion over the next five years.
In a move 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 has assured that it will not have access to view inside bank accounts and will not share personal information with third parties.
To identify overpayments, banks will examine benefit claimants’ accounts for savings levels 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.
Birmingham Live reports on the current rules for 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 main residence. Personal injury compensation is typically not counted for the first 12 months, and workplace/personal pension pots are disregarded indefinitely.
The Department for Work and Pensions (DWP) has clarified that a capital limit of £16,000 applies to 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.
Reductions 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.
Consequently, 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.
Therefore, in these cases, 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) disregards the first £10,000 of your savings. For every £500 you have above that limit, it’s viewed as £1 of weekly income, which will then be deducted from your payment.
There’s no upper limit on the amount of savings you can have to be eligible for Pension Credit.
Pension-aged individuals who are claiming Housing Benefit for their rent can also have up to £10,000 in savings without it affecting their claim. Each £500 over this threshold is treated as £1 of weekly income.
If you receive the guarantee credit part of Pension Credit, your Housing Benefit won’t be impacted 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 tread carefully, any deliberate attempt to reduce your savings to avoid reductions or cessation of benefits could land you in hot water. The DWP could investigate if disposing of assets constitutes what they term ‘deprivation of capital’ to circumvent benefit tapering or termination.
Decisions regarding deprivation of capital are made on a case-by-case basis and can include actions such as giving money away, spending large sums on luxury items like holidays or cars, purchasing properties, or moving funds into a trust. However, paying off debts or making “reasonable” purchases are considered acceptable.