52-Week Rule Compensation: What You Should Know
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If you’re on benefits and have been awarded personal injury compensation for an accident that was not your fault, you may be concerned about how it could affect your eligibility for the level of benefits you receive.
Read on to find out what the 52-week rule on compensation in the UK is, which benefits it might affect, and how to protect yourself from benefit deductions with a personal injury trust.
What is the 52-week rule?
The 52-week rule is applied by the Department for Work and Pensions (DWP), which means that they disregard your compensation payment from a personal injury claim when assessing your benefit entitlement.
They do this so you have time to recover from your injury and adjust financially so that you’re still eligible for benefits.
When you receive your compensation payment, you need to make sure you tell the benefits office about it straight away. The DWP will want evidence to check that you’ve not:
- Given away the money
- Transferred the ownership of assets or properties to someone else
- Bought items like jewellery or cars that aren’t included in a means test
The reason for these checks is to ensure you haven’t deliberately reduced the level of your savings to remain eligible for benefits. If they do think you have, they’ll assess any benefit claim as if you still had the money.
The documentation they might ask for could include your bank statements or settlement agreement. Make sure you keep them handy if they want to see them.
How the 52-week rule affects personal injury compensation
The 52-week rule starts on the day you receive your first payment. During these 52 weeks, you’ll still receive your benefits even if what you got in compensation exceeds the savings limits for benefits.
This means that, during your first year, your compensation does not affect your benefits.
While the DWP disregards your compensation award for 52 weeks, you’ll need to tell them if you’ve invested the money anywhere. If you have, let them know how much interest you’ve earned.
The DWP may also want to check on how you’re spending the money as well. They want to see that what you’re spending is ‘reasonable’ and in line with other claimants.
Which benefits are impacted by the 52-week rule?
The 52-week rule affects means-tested benefits. These are benefits that depend on certain eligibility criteria, such as how much you earn and what you have in savings.
Affected means-tested benefits include:
- Universal Credit: For people with a low income or out-of-work
- Pension Credit: For people over State Pension age with a low income
- Tax Credits (Child Tax Credit and Working Tax Credit): Designed to help with the costs of working and bringing up children
- Council Tax Support: Many on low incomes receive a reduction in their Council Tax
- Income-based Jobseeker’s Allowance: For unemployed people who are looking for work
- Income-related Employment and Support Allowance: This benefit is for people who can’t work due to illness or disability
- Income Support: For people on a low income who the DWP don’t require to look for work
- Housing Benefit: To help with your rental costs
Please note that the New Style Jobseeker’s Allowance and New Style Employment Support Allowance are not means-tested and are therefore unaffected by the rule.
Who is eligible for exemption?
You can set up a personal injury trust to protect your compensation and stay eligible for means-tested benefits.
Personal injury trusts are useful for people with severe injuries whose large compensation payments would otherwise affect their eligibility for benefits.
Trusts can be useful for people not claiming benefits right now but whose circumstances may change in the future through events like deteriorating health, retirement, job loss, relationship changes or moving home.
If you do want to set up a personal injury trust, make sure you follow these guidelines:
- Time it right: Set up the trust before you get your compensation as this could lead to disruptions in receiving your benefits
- Choose your trustee: Be certain that they are reliable and capable of managing the funds responsibly. You can pay for professional trustees at an extra cost.
- Take legal advice: Consult a solicitor with experience in setting up personal injury trusts so they can determine which type is best for your long-term needs.
How to calculate the 52-week rule for your benefits
To calculate the 52-week rule for your benefits, check your bank account to find out which day you received your first compensation payment.
The first payment could be an interim payment, a payment from an accident insurance policy, or a capital payment from a charity. Remember that the 52-week disregard only applies to the first payment and not to any subsequent ones.
There is some confusion about which payments qualify for the 52-week rule so it’s best to speak with someone at the DWP for clarity.
Make a note in your diary for the very same day the next year. That is the day on which the 52-week rule ends.
What happens after the 52-week period ends?
The 52-week rule for compensation is a concern for many people. That’s because many compensation payment plans stretch well beyond 52 weeks.
After that period, if you receive any further payments or if what remains of your compensation increases your savings above the threshold, this could reduce or stop your benefits.
In this situation, you should report any remaining compensation you have (plus compensation you might still be expecting) to DWP. This will help them accurately assess how much in benefits you’re entitled to.
You may have to prepare for either a reduction in the amount you receive or accept that you may no longer qualify. At this stage, seek guidance from the DWP, Citizens Advice, or the benefits specialist to find out if you qualify for any other benefits.
