DWP shares new update on £5,000 compensation for 57,000 benefit claimants

According to the benefits department, tens of thousands of people are set to receive compensation payments potentially worth up to £5,000

A new update has been issued by the Department for Work and Pensions (DWP) on compensation payments for nearly 57,000 benefit claimants.

According to the benefits department, tens of thousands of people are set to receive compensation payments potentially worth up to £5,000. This is because these people were receiving “legacy” disability benefits and were moved onto Universal Credit in the last few years.

These claimants were found to have lost their severe disability premiums (SDP) payment in the move, with the court ruling that the DWP did not do enough to ensure their incomes were protected when they moved over. The compensation payments follow two rulings by the High Court between 2018 and 2019 and the DWP’s failed attempt to challenge it in the Court of Appeal in 2020. The courts found that monthly loss of income in both cases amounted to around £180.

The compensation scheme was announced earlier this year after the DWP settled a case brought by law firm Leigh Day on behalf of 275 claimants. Each applicant was awarded between £200 and £3,000 in damages. Although Leigh Day estimates payouts could be as much as £5,000.

In February, DWP’s senior responsible owner for universal credit, Neil Couling, confirmed that most eligible claimants would receive compensation before the end of the year. However, the benefits department hopes to complete the repayment scheme by August 2025.

To be eligible for compensation, the DWP has previously confirmed that a claimant must be receiving – or had previously received – Universal Credit that includes an SDP element or transitional amount, or would have done had it not been eroded. They must then have met one of three more conditions immediately before their move to Universal Credit:

• They were entitled to an income-based legacy benefit that included an Enhanced Disability Premium
• They were entitled to an income-based legacy benefit that included the Disability Premium
• They were entitled to an income-based legacy benefit that included the Disabled Child Premium, or Child Tax Credit that included the Disabled Child Element (non-severely disabled category)

Overall, there will be three groups offered compensation payments, and these include:

• People due an additional amount of transitional SDP element for 2020 onwards, and who continue to receive Universal Credit
• People due an additional amount for the period between 2018 and 2020, and who continue to receive Universal Credit
• People due an additional amount relating from 2018 onwards who are no longer receiving Universal Credit

The DWP’s Director General for Fraud, Disability & Health, Neil Couling, previously shared in a Work and Pensions Committee meeting that there were around 35,000 people in this first group who can likely expect their payments first – 4,000 of which have already received a payout. This is because their cases are to be the “easiest” to handle as payments can be made automatically using the digital system. The second group contains around 15,000 people, and the third has around 7,000.

The DWP boss said the latter two groups all have “mixed clerical and digital records”, which makes things “slightly more complex”. The DWP says this is because these cases involved the DWP converting from a manual SDP payment to being paid through the universal credit system. The second group of people should start to get their payments by the end of March.

No deadline has been given for the third group of around 7,000 customers. These are people who received an SDP payment either manually or on-system, but have since seen their universal credit claim close. Due to the “more complex” nature of their cases, “analysis is ongoing to determine the level of work required to enable payments to be made” to them according to Couling.

There are five possible payment rates, and these will be made for each month between the claimant’s transition to Universal Credit and when new income protection regulations came into force in February 2024. These back payments will be calculated by giving claimants what they would have been entitled to had the new rules been in place when they transitioned. The monthly rates are:

• Enhanced Disability Premium, single person – £84
• Enhanced Disability Premium, couple claim – £120
• Disability Premium, single person – £172
• Disability Premium, couple claim – £246
• Disabled child – £177 per eligible child