DWP Compensation Update : The Department for Work and Pensions (DWP) has introduced a compensation scheme to support approximately 57,000 benefit claimants who suffered financial setbacks when transitioning from legacy benefits to Universal Credit. This initiative specifically addresses the loss of Severe Disability Premiums (SDP), which many claimants lost during the migration process. Legal rulings found the previous system inadequate, prompting the government to take corrective action.
Background
Between 2018 and 2019, the High Court ruled that the DWP had not sufficiently protected the financial interests of claimants moving from legacy benefits to Universal Credit. As a result, thousands of disabled individuals lost approximately £180 per month. The affected claimants were primarily those who had been receiving disability-related benefits. Multiple legal challenges upheld these claims, leading to the creation of a compensation package designed to provide financial relief.
Eligibility Criteria
To qualify for compensation, claimants must meet the following conditions:
- Universal Credit with an SDP Component – The individual must either be receiving Universal Credit with an SDP element or transitional payment, or they should have been entitled to it but lost it due to policy changes.
- Previous Benefit Qualification – Before switching to Universal Credit, the claimant must have been receiving at least one of the following:
- An income-based legacy benefit that included an Enhanced Disability Premium
- An income-based legacy benefit that included a standard Disability Premium
- An income-based legacy benefit with the Disabled Child Premium, or Child Tax Credit with the Disabled Child Element (non-severely disabled category)
These criteria ensure that only those who experienced a significant reduction in benefits due to the loss of SDP during the transition are eligible for compensation.
Compensation Payment Amounts
The amount claimants receive depends on the specific premium they lost. The monthly compensation rates are as follows:
- Enhanced Disability Premium:
- Single claimant: £84
- Couple claim: £120
- Disability Premium:
- Single claimant: £172
- Couple claim: £246
- Disabled Child Premium:
- Per eligible child: £177
These payments will be calculated for each month a claimant was affected, from their transition to Universal Credit until the government implemented new income protection measures in February 2024. In some cases, total compensation could exceed £5,000 per claimant, depending on the duration of the shortfall.
Payment Timeline
The DWP has structured its payment rollout into three distinct groups:
- Current Universal Credit Recipients (Post-2020 Transition)
- Who is included? Around 35,000 people who switched to Universal Credit after 2020 and are still receiving benefits
- When will payments be made? Payments are already being processed through the DWP’s digital system, with over 4,000 successfully completed. The department aims to finalize payments for this group by August 2025
- Current Universal Credit Recipients (2018-2020 Transition)
- Who is included? About 15,000 claimants who moved to Universal Credit between 2018 and 2020 and are still on benefits
- When will payments be made? This group is expected to start receiving payments by March 2025, with completion scheduled for August 2025. Additional time is needed to ensure the correct conversion of manual SDP payments to Universal Credit
- Former Universal Credit Recipients
- Who is included? Roughly 7,000 individuals who previously received SDP-related payments but whose Universal Credit claims have since been closed
- When will payments be made? The DWP has not yet provided a firm timeline due to the complexity of identifying and processing these cases. Further assessments are ongoing to determine the best approach
This phased distribution system ensures that payments are made in a structured and efficient manner, minimizing delays for eligible claimants.
What Should Claimants Do?
Claimants should ensure that their contact details are updated with the DWP to avoid any potential issues with receiving their compensation. Although many payments will be processed automatically, staying informed about eligibility and the status of a claim can help resolve any unforeseen issues promptly.
Final Thoughts
The DWP’s compensation scheme is a crucial step in addressing past policy shortcomings that led to financial losses for thousands of disabled claimants. By clearly defining eligibility, compensation amounts, and payment schedules, the department aims to correct past mistakes and provide financial relief to affected individuals. Claimants should remain proactive in tracking their compensation status to ensure they receive the payments they are entitled to, ultimately restoring some of the financial stability lost during their transition to Universal Credit.
