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Protecting means tested benefits

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When compensation is awarded as part of a personal injury claim, the receipt of a lump sum payment may affect your entitlement to means tested benefits. If you already have savings (capital) of over £6000, any additional compensation payment will mean that your entitlement to Department of Work & Pensions (DWP) means tested benefits will reduce.  Further, if the compensation payment increases your capital level to over £16,000, then you will lose your entitlement to benefits altogether.

The benefits that're currently means tested and are on universal credit are:

  • Income Support
  • Income based Jobseekers Allowance
  • Income related Employment and Support Allowance
  • Working Tax Credits
  • Housing Benefit

The benefits that are currently means tested and are not on universal credit are:

  • Local Authority Funded Care
  • Council Tax Reduction
  • Free Prescriptions and healthcare

If you receive any of the above benefits, or you intend to claim them in the future, you should consider setting up a Personal Injury (PI) Trust.  If you place your compensation payment within a PI Trust, then:

  • your compensation is disregarded for the purpose of calculating your entitlement to benefits
  • your funds are protected from any other external influence
  •  you will not lose control of your compensation
  • you can access your money at any time
  • you can be one of the Trustees alongside a trusted friend or family member.

A PI Trust can be arranged for an interim payment or a final compensation award and must be set up as soon as possible once you receive your compensation, although the DWP allows a 52 week period within which to spend your compensation payment. Beware however of any suggestion that you have deliberately disposed of capital for the purpose of protecting your entitlement to benefits. 

As a PI Trust is, by far, the best way of protecting your position, we strongly recommend that you set this up before you receive any money. We are happy to help you to do this, so please call us for more information.