Fraud and error have crept up since the pandemic, and the welfare system is under fresh scrutiny. Claimants are asking what this means for their money.
The Department for Work and Pensions is preparing a sweeping upgrade of its anti-fraud toolkit, including data-matching with banks and faster debt recovery from payslips and accounts. One reassurance stands out: the state pension will not be subject to the new bank checks.
What is changing and when
Ministers plan to phase in new powers from April 2026 under the Public Authorities (Fraud Error and Recovery) Bill, with full implementation targeted between 2029 and 2031. The package is designed to spot ineligible claims earlier, prevent overpayments, and recover money more quickly where errors or dishonesty are found.
Officials say fraud is still rising, with internal projections pointing to a 5% annual increase. The figures driving the change are stark: £9.7 billion was overpaid in 2023–24 through fraud and error, equal to 3.7% of all benefit spending, up from £8.3 billion and 3.6% the year before.
The state pension is exempt from the new bank data checks. Routine spending will not be monitored, and any final decision will be taken by a human caseworker.
How the bank checks will work
The DWP will not see your itemised transactions. Instead, banks will be required to run automated checks against specific “eligibility indicators” set out by the department. This will happen only on accounts that receive DWP payments.
Where an indicator suggests that the conditions for a benefit might no longer be met, the bank will send an alert. Only then can the DWP request limited additional information and decide whether to open a full investigation. Routine snooping on day-to-day purchases is not part of the system.
Eligibility verification notices
The mechanism hinges on Eligibility Verification Notices sent by the DWP to banks. These notices list the indicators banks must test against, such as signs of income, savings or circumstances inconsistent with the rules of a benefit. The details of the indicators will be set in regulation and subjected to oversight, with reports laid before Parliament.
Alerts are triggered by indicators, not by curiosity. Banks share minimal data unless a rule-based alert fires, and even then, a human reviews the case.
One benefit ring-fenced: the state pension
Ministers have confirmed that state pension payments are outside the scope of these bank checks. Pensioners will not have their accounts screened for eligibility around the state pension. Other pension-age support, such as Pension Credit, remains within scope because it is means-tested.
Who is likely to be flagged
The focus is on means-tested support, where eligibility depends on income, savings and living arrangements. If financial activity appears inconsistent with the rules, an alert may be generated and a review may follow.
- Universal credit: for people on low incomes or out of work.
- Housing benefit: help with rent, mostly for pension-age claimants not on universal credit.
- Income support: legacy low-income support in limited cases.
- Income-based jobseeker’s allowance: legacy benefit for people looking for work.
- Income-related employment and support allowance: legacy sickness and disability support.
- Council tax reduction: support with local council tax bills for low-income households.
- Tax credits: working and child tax credits, now largely replaced by universal credit.
- Pension credit: top-up for people over state pension age with limited income and savings.
Key numbers and dates at a glance
| Item | Figure or timing |
|---|---|
| Overpayments 2023–24 (fraud and error) | £9.7bn (3.7% of spend) |
| Overpayments 2022–23 (fraud and error) | £8.3bn (3.6% of spend) |
| Projected annual fraud growth | 5% per year |
| Start of new powers | From April 2026 |
| Full rollout window | 2029 to 2031 |
| Exempt from checks | State pension |
What happens if your account is flagged
An alert does not mean guilt. The DWP may contact you to confirm details, request evidence or schedule an interview. A person—not a computer—makes the final decision about your claim. If an error or overpayment is found, the department can seek repayment and, under the new powers, recover debts directly from wages or bank accounts in serious cases.
You have rights. You can ask for a mandatory reconsideration if you think a decision is wrong. If you still disagree, you can appeal to an independent tribunal. You can also request a copy of the information used in your case and challenge anything that looks inaccurate.
Safeguards and oversight
The legislation provides for independent oversight of the new powers, with reporting to Parliament. Ministers have said no personal spending data will be shared with banks beyond what is needed to run the indicators, and the state pension sits outside the system entirely. The aim is to prevent errors from snowballing into large debts while targeting organised fraud more quickly.
Why the government says it is acting
Officials point to a sustained post-pandemic rise in fraud and error. The department argues that outdated processes—like relying on letters for evidence-gathering—slow down investigations and let organised fraud get ahead of enforcement. By automating the earliest checks, they expect to spot mismatches faster and reduce the build-up of debt for people who make genuine mistakes.
Practical examples of potential indicators
The exact indicators will be set by regulation. In practice, banks could be asked to look for patterns that suggest a claim might no longer fit the rules for a means-tested benefit. Examples could include:
- Balances or regular deposits suggesting savings or income above the relevant thresholds.
- Frequent wages from an employer when a claim assumes no or low earnings.
- Activity that hints at a change of household or residency relevant to eligibility.
An alert alone does not change your benefit. It flags a case for a human review to verify whether a change of circumstances has happened and whether the claimant informed the department.
What you can do now
- Report changes quickly: tell the DWP or your council if your income, savings, household or work status changes.
- Keep records: save payslips, bank statements, tenancy agreements and letters. They help resolve queries faster.
- Check thresholds: know the savings and earnings rules for your benefit so you can judge when to report changes.
- Ask for help: seek advice if you receive a compliance letter or interview request so you understand your options.
- Challenge errors: if you think a decision is wrong, request a mandatory reconsideration within the deadline.
Extra context that could affect you
Universal credit and other means-tested benefits have specific rules on savings and earnings. A modest pay rise, extra hours or a bonus can change entitlement in the month it is received. For pension-age claimants, Pension Credit has different capital rules from the state pension; a small increase in savings can alter eligibility. If you hold a joint account, both holders’ finances may be relevant to a means-tested claim.
People who work irregular hours should keep clear evidence of fluctuating pay. If you receive payments from a lodger, a side job or freelance work, record dates and amounts and check how they interact with your claim. If you travel or stay away from home for extended periods, make sure you understand how this interacts with residency conditions on certain benefits.
If DWP won’t see itemised transactions, how will banks infer “household changes” without overreach? Mission creep risks feel real—what’s the independant oversight beyond reports to Parliament?