Legacy benefit claimants may be due ‘compensation' after Universal Credit move

People who transferred onto Universal Credit from six legacy benefits may be eligible for compensation following a DWP decision that left them financially disadvantaged during the migration process.

The department has now launched the Successful Legacy Appeals Compensation Scheme, offering one-off payments to those who experienced a financial loss.

Claimants previously receiving Housing Benefit, tax credits (Child Tax Credit and Working Tax Credit), income-related Employment and Support Allowance, income-based Jobseeker's Allowance and Income Support have been gradually transitioning to the Universal Credit system.

As part of this switchover, once a claimant applies for Universal Credit, their legacy benefits cease and cannot be reinstated.

However, a 2020 Court of Appeal ruling determined that some people had their legacy benefits incorrectly stopped by the DWP and subsequently claimed Universal Credit, receiving a reduced amount compared to their previous legacy benefits.

When the erroneous decision was overturned, for instance through a successful appeal, those affected were unable to have their legacy benefits restored as they had already made a claim for Universal Credit.

The court acknowledged that these claimants had suffered a "financial loss" and the scheme has been established to provide redress. It will offer a lump sum payment to cover the shortfall incurred as a result of being unable to revert to their previous benefit.

All of the following must apply for a person to potentially be eligible for the compensation:

Only people who satisfy all of these criteria are eligible under the scheme. The DWP will determine whether you qualify for a payment.

Those who believe they meet the eligibility requirements can submit an application form online, or alternatively write a letter addressing the questions on the form and post it to the addresses listed on the Gov.uk website. The DWP should issue a decision within six weeks of receiving your application.

For the majority of people transitioning to Universal Credit, Transitional Protection has ensured they are no worse off financially than they were on their legacy benefit.

However, to qualify for Transitional Protection, claimants were required to wait for a migration notice to arrive by post and then apply for Universal Credit before the personal deadline stated in the letter. Those whose legacy benefits were terminated due to an incorrect decision would therefore not have been eligible. Transitional Protection effectively permits claimants to circumvent regulations and requirements that would typically result in them receiving less on Universal Credit than they did on their previous legacy benefit.

For instance, if a person received £600 monthly from Tax Credits but is only entitled to £400 from Universal Credit under standard eligibility criteria, the Transitional Protection will provide an additional £200. Consequently, they continue to receive the same £600 payment each month.