Does injury compensation affect my state benefits?

If you are in receipt of means tested state benefits, such as income or housing support, then the receipt of a lump sum personal injury award may affect your entitlement to future benefits depending on how much compensation you receive.

Means assessed state benefits take into account your income, assets and savings to assess your eligibility to claim. These items, added together, are known as your "capital." If the value of your personal injury compensation, added to your capital, exceeds certain financial thresholds, then it may affect the amount of benefits you can claim.

How will my compensation reduce my state benefits?

The first £6,000 in capital is disregarded when assessing your eligibility for state benefits. If your personal injury compensation is relatively low, such that your total capital remains below £6,000, then your benefits eligibility will not be affected. The majority of personal injury settlements fall into this category. For example, a minor whiplash claim would probably receive a settlement of £3,000 or less.

If your personal injury compensation means that you have more than £6,000 in capital then your state benefits will be reduced by £1 per week for every £250 held over the £6,000 limit.

If your compensation means that you have more than £16,000 in capital then you are no longer eligible to receive state benefits. Your benefits will be suspended until your capital falls below £16,000 when a fresh application must be made.

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What about state benefits received as a direct result of my injuries?

If you receive state benefits as a direct result of a disease caused by work, these may be deducted from your settlement award and paid directly to the government by way of reimbursement.

This includes payments made under the Diffuse Mesothelioma Scheme and the Pneumoconiosis etc (Workers Compensation) Act 1979.

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Which benefits are affected?

Any means tested benefit may be reduced following the receipt of personal compensation, including:

  • Jobseeker's allowance
  • Income support
  • Pension credit
  • Housing benefit
  • Council tax benefit.

Benefits that are payable whatever levels of capital you have, such as incapacity benefit and disability living allowance, will not be affected by any compensation payment.

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Is there anything I can do to avoid losing state benefits?

For many Claimants, losing their state benefits is a real blow, especially when the amount of personal injury compensation they receive is not life changing. However, there are ways to mitigate the risk of a lump sum compensation payment affecting your benefits.

One option is to have your solicitor set up a personal injury trust. This allows you to accept a small lump sum immediately (one that will not push you over capital limits) and have the rest of the compensation invested. The invested money is not taken into account when assessing your eligibility for state benefits and you can draw a small amount of money from the trust each year to cover specific expenses.

The best advice is to speak to your personal injury lawyer and discuss what they can do to help you.

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