Innocent pensioners face fraud investigations under new bank account snooping laws

Charities warn millions on pension credit could be wrongly flagged by DWP algorithms



Innocent pensioners will be dragged into lengthy fraud investigations by new Government snooping powers, charities have warned.

The House of Lords is debating new rules that will allow the Department for Work and Pensions (DWP) to demand data on benefit claimants’ accounts from banks and directly claw back overpayments in a clampdown on fraud and error.

But charities have warned millions of retirees on pension credit could be wrongly dragged into the crackdown and forced to go through a “lengthy appeals process” to get their money back.

In an open letter to Pat McFadden, the Secretary of State for Work and Pensions, charities including Age UK and Silver Voices said new rules would constitute an “unprecedented level of population-wide mass surveillance”. The letter added that the new powers would leave members of the public at “risk of algorithmic errors, wrongful investigations and burdensome appeals”.

It cited benefit claimants who said they had previously been investigated by the DWP after being wrongly flagged as fraudulent claimants.

The powers are due to be granted under the Public Authorities (Fraud, Error and Recovery) Bill, currently in the House of Lords. It means the DWP will be able to demand that banks share data on those receiving a number of benefits.

This information will be examined to find evidence of fraud and government error, and money could be reclaimed directly from “relevant” accounts, using recovery powers expanded by the legislation.

An estimated £9.5bn was lost last year due to benefit overpayments and fraudulent applications, the equivalent of 3.3pc of the total benefits bill.

The Government previously insisted to The Telegraph that it would not have access to bank accounts and that decisions about benefit entitlement would be taken by a human.

Instead, these powers will enable the DWP to order banks to recoup overpaid money directly from accounts, even without a court order.

The letter, also addressed to Baroness Sherlock, a minister in the DWP, was signed by 11 campaign groups and charities, including Disability Rights UK, and Big Brother Watch.

It quoted pensioners concerned about the surveillance powers. One pensioner claiming pension credit said: “I occasionally need to pay quite large bills at one time thus depleting my savings. I am concerned that this movement in my account may trigger the algorithm to flag up a defraud.”

Another said they’d stopped buying lottery tickets in case a win was flagged as unusual, saying: “I genuinely won’t know if I do something wrong by mistake and end up losing the roof over my head as a result.

“Because of this I’ve stopped doing the lottery just in case it takes me £10 over what I’m supposed to be entitled to, and I’m paranoid about subscribing to anything in case it makes my bank account flag up to them.”

Others said they had previously been investigated by the DWP after being wrongfully flagged. One said: “I had to get letters from each of these banks to clear my name as none of the banks answered the DWP. The mental anguish this has caused me is unbearable and nearly sent me under.”

Jasleen Chaggar, of campaign group Big Brother Watch, said vulnerable people would be treated as “suspects by default” and that the legislation would not tackle “serious fraudsters”.

“It will be disabled people, the elderly, carers and those living in poverty who are most likely to be wrongfully flagged by the algorithm, investigated and forced through lengthy, draining appeals.”

Trade bodies, including UK Finance, which represents large banks, have also stated their opposition to the new powers, raising concerns about operational challenges and the risk of unintended harm to vulnerable customers.

In 2024-25, just 6pc of DWP regional fraud investigations led to convictions, according to government data. In all fraud investigations, 2,191 had their benefit corrected, while 8,075 cases resulted in no charge.

https://www.telegraph.co.uk/money/banking/current-accounts/innocent-pensioners-fraud-investigations-new-bank-snooping/