The 52 week rule in compensation claims exists to protect your settlement as well as your entitlement to means tested benefits.
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What is the 52 Week Rule in Compensation Claims?
If you receive compensation for a personal injury, whether through a settlement or court award, it could affect any means-tested benefits you receive or plan to claim in the future.
The 52 week rule in compensation claims exists to protect your settlement as well as your benefits. It provides a grace period of up to 52 weeks during which your compensation is generally ignored by the Department for Work and Pensions (DWP) when assessing your benefit entitlement, provided certain conditions are met.
During this time, you can decide how to manage your compensation and whether to set up a personal injury trust to safeguard it. After the 52-week period, any unprotected compensation will be treated as income or capital and may reduce or stop your benefit payments.
Read on to learn more about the 52 week rule in personal injury claims and how you can protect your benefits by setting up a personal injury trust.
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Why does the 52 week rule exist?
Personal injury compensation is usually awarded as a lump sum payment deposited directly into your bank account. However, when this sum is over £6,000, it could reduce the amount of means tested benefits you can claim or disqualify you altogether from receiving them.
Even if you are not currently claiming benefits, a substantial compensation payment could affect your future entitlement and can be challenging to manage on your own.
To help with this, the government allows a 52-week grace period, giving you time to:
- Recover and adjust after your injury.
- Seek independent legal and financial advice.
- Decide whether to place the money into a personal injury trust.
- Protect your compensation and entitlement to receive benefits.
When does the 52 week period apply in personal injury claims?
The 52 week period usually begins from the date you first receive your personal injury compensation award, even if that is an interim payment and not your final settlement. You must inform the benefits office about your payment straight away, and you may be asked to present evidence that you:
- Have not given away any of the money.
- Have not transferred ownership of properties or assets to another person.
- Have not spent the funds on items that are excluded from means testing, such as cars or jewellery.
You may need to provide your settlement agreement and documents such as bank statements. If the DWP determines that you have deliberately reduced your capital to remain eligible for benefits, the value of that money may still be treated as notional capital and included in your means test assessment.
What benefits are impacted by the 52-week rule?
The compensation received for a personal injury aims to cover your pain, suffering and financial losses, not to provide extra income or replace state benefits.
However, if it is deposited into your bank account, it will be treated as capital at the end of the 52 weeks. While this will not usually affect non-means-tested benefits, such as Disability Living Allowance (DLA) and Attendance Allowance, it will impact many means-tested benefits, such as:
- Jobseeker’s allowance.
- Council tax reduction.
- Universal credit.
- Pension credit.
- Income support.
- Housing benefit.
- Tax credits (child tax credit and working tax credit).
- Cold weather payment.
- Income-based employment and support allowance.
What happens after the 52 weeks have passed?
At the end of the 52 week disregard period, any personal injury compensation held in your standard bank account will generally be treated as savings by the DWP, and:
- If it is over £6,000, your means-tested benefits may be reduced.
- If it is over £16,000, you could entirely lose your entitlement to benefits.
Setting up a properly constituted personal injury trust within the 52-week period will usually mean your compensation is excluded from these calculations, and you may continue receiving your means-tested benefits at their full rate.
Do I have to set up a personal injury trust within 52 weeks?
There is no legal requirement to set up a personal injury trust within 52 weeks of receiving compensation. However, it is often advisable to set up the trust as soon as you receive your first payment.
This will ensure your award is managed safely and used for its intended purpose, while being safeguarded from third parties and means assessments.
At the end of the 52 week grace period, the benefits office may review how you have spent the compensation. If your expenditures are not considered reasonable under the deprivation of capital rules, some or all of the money may still be counted as your capital, which could affect your entitlement to means-tested benefits.
By setting up a trust immediately, you can avoid complications, safeguard your award, and gain peace of mind knowing your compensation is being handled correctly.
Do I need a personal injury trust if I don’t claim benefits?
A personal injury trust is a legally binding arrangement that allows you to hold your compensation in a separate account managed by trustees. Your solicitor may advise you to set up a trust even if you’re not currently claiming benefits, because, depending on your circumstances:
- It will protect your eligibility if you decide to claim means-tested benefits in the future.
- It ensures your compensation is kept separate from your personal finances and protected from third parties, such as creditors.
- A trust ensures that the compensation is used for its intended purpose, such as medical treatments and long-term care.
- It offers long-term security and financial stability.
Acting promptly to set up a personal injury trust can protect both your award and your benefits. For free legal advice and guidance, call us on 0800 470 0472 or use our online contact form to request a call back.
