DWP bank checks: are you safe as state pension is spared, £9.7bn lost and 5% rises loom for you?

New anti-fraud powers are on the way, with banks set to help spot red flags. Timelines are long, and the figures are eye-watering.

Ministers have confirmed one group will be outside the new dragnet, even as officials prepare stricter debt recovery and tighter controls.

What the DWP has confirmed

The Department for Work and Pensions will gain fresh powers to tackle benefit fraud and error, including the ability to order deductions directly from wages and, in some cases, from bank accounts. The Labour government plans to phase in the system from April 2026 under the Public Authorities (Fraud Error and Recovery) Bill, with full deployment expected between 2029 and 2031.

The state pension will be exempt from the new bank data checks. Pensioners’ accounts will not be trawled for spending details.

Officials say the DWP will not view your day‑to‑day purchases. Instead, banks will receive legally binding notices and use set “eligibility indicators” to identify accounts that might no longer meet benefit rules. Only when an alert triggers will the DWP open a case and request limited details for a targeted inquiry, with a human making the final call.

Why this is happening

Fraud and error overpayments reached an estimated £9.7 billion in 2023–24, or 3.7% of total benefit spending, up from £8.3 billion the previous year. Officials also expect fraud pressure to rise by about 5% a year if nothing changes, reflecting post-pandemic vulnerabilities and more sophisticated scam tactics.

£9.7bn lost last year. The DWP says people with legitimate claims “have nothing to fear”, but the anti-fraud net will tighten.

Ministers argue that DWP enforcement tools have not kept pace for two decades. The planned upgrade aims to prevent errors before they happen, stop large debts from building up, and recover money owed to taxpayers faster.

How the bank checks will work

Eligibility Verification Notices

The DWP will send banks Eligibility Verification Notices (EVNs). These set out indicators that suggest a claimant may have ceased to qualify—for example, signals of savings above a limit for a means-tested benefit. Banks will run checks against information they already hold; they will not supply transaction histories as a matter of course.

If an account matches an indicator, the bank flags it. The DWP then decides whether to investigate. If it does, it may request minimal additional data to verify eligibility, and a caseworker—not an algorithm—will decide on any change to payments.

Oversight and privacy

Ministers say independent oversight will be written into the Bill, with reports laid before Parliament. Personal data sharing will be limited to what is necessary for eligibility checks and debt recovery, with no blanket access to your purchases.

No automatic snooping. Banks flag risks; DWP caseworkers review and decide. The state pension sits outside the scheme.

Who could be affected first

The system aims at means-tested benefits, where entitlement depends on your income and capital. Where a bank’s data suggests you may be over the savings limit or earning more than declared, an alert could follow.

• Universal credit: support for people in or out of work on a low income, with a £16,000 capital limit.
• Housing benefit: rent help for low-income households, usually with capital rules similar to legacy benefits.
• Income support: legacy low-income support for certain groups.
• Income-based jobseeker’s allowance: for people seeking work, income and capital tested.
• Income-related employment and support allowance: for people with limited capability for work, income and capital tested.
• Council tax support/reduction: local schemes based on income and savings.
• Tax credits: being replaced by universal credit for most new claims; means-tested with capital and income rules.
• Pension credit: tops up income past state pension age, with capital considered.

Contributory and non-means-tested benefits are less likely to be in scope of bank checks. Crucially, state pension accounts will not be checked under this power.

Key dates and what to expect

What this could mean for your payments

If a bank flags your account, the DWP may review your claim. Where overpayments are found, the department can seek repayment. Ministers have signalled a tougher approach to recovering debts, including direct deductions from pay packets and, in defined circumstances, from bank accounts. Repayment plans will vary by case and the benefit involved.

People who qualify legitimately should see no change. The power targets cases where data suggests ineligibility—such as capital above thresholds or undisclosed income—so keeping claim details up to date matters more than ever.

Practical steps if you’re worried

Reduce the risk of a false flag

• Report changes quickly: savings crossing key thresholds, new work, overtime, or partner moving in can change entitlement.
• Keep records: bank statements, payslips, tenancy agreements and childcare receipts help caseworkers verify your situation fast.
• Check your capital: for universal credit, savings over £16,000 generally end entitlement; between £6,000 and £16,000 can reduce it.
• Use your UC journal or contact channel to log updates and confirm receipt.

If you are contacted

• Respond by the deadline on any DWP letter or message and provide requested documents.
• If you disagree with a decision, ask for a mandatory reconsideration, then appeal to a tribunal if needed.
• For overpayments, discuss an affordable recovery plan; deductions can be adjusted if they cause hardship.

What counts as an ‘indicator’

The DWP has not published a definitive list. In practice, banks are expected to look for signals that conflict with eligibility rules they can reasonably infer from their records. Examples might include sustained balances above a known capital limit for a means-tested benefit, or frequent inflows that resemble wages not declared in a claim. Any alert triggers review, not an automatic penalty.

An alert is not a verdict. It prompts a human-led eligibility check, with decisions based on evidence you can challenge.

A worked example

Imagine a universal credit claimant holds £17,500 in combined current and savings accounts for several months. A bank flag could trigger a DWP check, because UC entitlement normally ends once capital exceeds £16,000. If the claimant failed to report the change, the DWP may calculate an overpayment for the relevant period. Recovery could happen through deductions from future UC, a direct earnings attachment if the person is working, or a bank-based route under the new powers once live.

Where this leaves pensioners

State pension claimants sit outside the new bank data regime. The DWP says it will not view or trawl pensioners’ bank accounts under this power, and the state pension itself is not subject to the bank-check measure. Pension credit, though, is means-tested, and could feature in checks where banks spot indicators of higher capital or income in accounts receiving that benefit.

What to watch next

Expect pilots from April 2026, expanding to more banks and benefits in stages. Parliament will receive oversight reports, and the government will refine guidance as results come in. Claimants should keep an eye on official letters that reference “Eligibility Verification Notices” and respond promptly.

People juggling work and fluctuating hours may want to set calendar reminders to update the DWP after pay changes. Households with savings near a threshold should track balances closely to avoid accidental overpayments. And anyone facing debt recovery can seek a review of deduction levels, especially if rent, energy or childcare costs leave too little to live on.