I have read in various places that banks are not allowed to take bank charges from benefit payments. THIS IS NOT THE CASE.
Once a benefit payment is credited to an account it merges with the existing account balance, whether this is overdrawn or in credit. If the account is overdrawn the bank are fully within their rights to offset the benefit payment against the overdraft and take any charges.
Regarding Section 187 of the Social Security Act 1992:
1. Section 187 provides that every assignment of or charge on benefit and every agreement to assign or charge such benefit shall be void. This section is designed to ensure that claimants do not give up or put at risk benefit designed to ensure a minimum standard of living for themselves and for their families.
2. Section 187 does not prevent banks from making charges relating to the claimants bank accounts. Such charges imposed by banks would be outside the scope of Social Security legislation. One of the vices which section 187 was designed to catch was to protect claimants from pledging their order books to loan sharks to defray debts owed to third parties. It does not affect the ability of the banks to make charges pertaining to claimants account.
However, under the terms set out in the Banking Code, banks are obliged to deal with all cases of financial difficulty sympathetically and positively. Customers who find themselves in difficulty should speak to their account provider about their needs in order to come to an arrangement to deal with their debt and safeguard their benefit payments.
I hope this clarifies the situation.