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Will a Compensation Claim Affect My Benefits?

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Will a Compensation Claim Affect My Benefits?

If you are receiving more than £6,000 in compensation, or your savings plus your compensation payment will take your savings to more than £6,000 then it is likely claiming damages will affect your benefits. Without knowing all your particular circumstances, it is hard to say for certain whether a compensation payment will affect your benefits, but there are ways you can protect your benefits and still claim compensation.

Compensation and Benefits

If you receive a lump sum compensation benefit, then you need to inform the Compensation Recovery Unit, which is part of the Department for Work and Pensions (DWP) so they can accurately assess your benefits allowance.

As advised by MoneyHelper, compensation is treated as savings when it comes to means tested benefits. The current savings threshold at which means-tested benefits stop is £16,000, but all savings above £6,000 will affect the amount of benefits you can receive. Benefits which may be affected include universal credit, housing benefit, and council tax support.

Your compensation payment will not be counted towards your savings threshold for 52 weeks from the date it is paid (even if the first payment is an interim payment), but the way in which you spend it will be examined for “reasonableness” of someone who is in receipt of your type of benefit.  If you invest your payment, you need to declare any interest you earn to the DWP.

Personal Injury Trusts

You do not have to sacrifice your benefits to claim compensation or vice versa. Indeed, people in receipt of benefits are often those who are in most need of fair compensation. A possible solution which will allow you to receive money for damages without affecting your benefits payments is to set up a personal injury trust.

A personal injury trust will give you the ability to pursue the maximum compensation to which you may be entitled without putting your means tested benefits at risk, or lose out if you need care provided by your local authority. A settlement payment that goes into your bank account is considered your money, but damages paid into a trust are not examined by the DWP when assessing your finances.

A personal injury trust manages your compensation separately from your personal finances. A solicitor draws up a trust and at least three trustees are appointed – one of which can be you if your trust is straightforward. The trustees have control over how your compensation is spent so choose people you can rely on to put your best interests at heart. You can set up a bare trust which gives you the ability to replace trustees as necessary.

Do I Need a Personal Injury Trust

If you receive means-tested benefits and already have at least £6,000 in savings or are being paid at least £6,000 in compensation, then you should certainly consider a personal injury trust if you do not want your benefits to reduce or cease.

You have control over how the money in your trust is spent, but it is not considered your personal money so will not affect your benefits. Money in a trust can be spent how you choose, however, take financial advice as rules regarding this have changed in recent years, and can potentially alter again.

Making a personal injury claim 

Receiving benefits should not deter you from seeking the compensation you could be entitled to, but if you’re concerned, you are welcome to get in touch with us for more information about seeking damages if you currently receive benefits.  

At The Compensation Experts we’ve supported hundreds of people like you seek compensation, so let us help you start your claim today. Simply call us on 0800 182 2190 or request a callback.