Does personal injury compensation affect benefits?
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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.
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.
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.
Which benefits are affected by a compensation payout?
Benefits which may be affected by compensation by compensation include:
- Universal credit
- Housing benefit
- Council tax support
- Pension credit
- Income-based jobseeker’s allowance
- Income- based employment and support allowance
- Income support
- Tax credits (child tax credit and working tax credit)
Compensation should not affect benefits which are not means-tested.
How does compensation affect universal credit?
For compensation to affect Universal Credit entitlement, your settlement would need to take you or your partner over the £6,000 savings threshold.
MoneyHelper explain that if you or your partner’s savings or capital falls between £6,000 and £16,000, the first £6,000 is disregarded. The remainder is treated as if it is a monthly income of £4.35 for each £250, or part of £250.
If you and/or your partner have £16,000 or more saved, you won’t be eligible for Universal Credit.
Can the DWP take my compensation?
MoneyHelper explain that when you claim compensation for an accident, the organisation you’re making a claim against must tell the DWP.
If you’ve received benefits due to the accident, the organisation or compensator might have to pay back this benefit amount to the DWP, and this might be deducted from your payout.
What is the 52 week rule around compensation?
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). However, 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.
How can I protect my benefits if I claim compensation?
Personal Injury Trusts
You do not have to sacrifice your benefits to claim compensation or vice versa. A possible solution which will allow you to receive money for damages without affecting your benefits payments is to set up a DWP personal injury trust.
A DWP 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 DWP 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 it might be wise to 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.
Compensation and Benefits: 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 about any potential compensation affecting your benefit entitlement, it’s worth seeking expert advice.
We’ve helped people just like you who were worried about a compensation payout affecting benefits. We can partner you with a personal injury solicitor, who can help you protect your compensation. Call us on 0800 182 2185 or request a callback now.
