The Department for Work and Pensions (DWP) has provided an update on a major compensation scheme set to benefit thousands of claimants following a lengthy legal battle. Around 57,000 people who experienced financial losses when moving from legacy benefits to Universal Credit will receive compensation payments averaging £2,100 each.
Background to the Compensation Scheme
The dispute arose after individuals who had been receiving Severe Disability Premiums (SDP) and Enhanced Disability Premiums (EDP) saw their financial support reduced upon transitioning to Universal Credit. Some claimants faced monthly losses of up to £180, sparking widespread criticism and legal action against the government.
Following a series of court rulings, the government conceded that affected individuals were unfairly disadvantaged. The DWP has now committed to compensating those impacted, with payments expected to be fully distributed by August 2025.
Who Is Eligible for Compensation?
The compensation is available to claimants who:
- Were previously receiving SDP and/or EDP under the old benefit system
- Moved to Universal Credit between 2017 and 2022 and lost financial support as a result
- Were affected by the transition before the DWP introduced the transitional payment protections
Individuals who believe they are eligible but have not yet been contacted can check their status by visiting the UK Government’s official Universal Credit page or contacting the DWP directly.
DWP Scraps Controversial Rent Deduction Scheme
In a related move, the DWP has also announced the termination of an automated rent deduction scheme that allowed landlords to take rent payments directly from tenants’ Universal Credit benefits without their explicit consent. The “click-screen” system, which enabled deductions of up to 20% from a claimant’s standard allowance, was deemed unlawful by the courts.
Work and Pensions Secretary Liz Kendall confirmed that the government would replace the system with one that ensures tenants retain control over their finances. “We are committed to a fairer welfare system where people have full visibility over their benefits and deductions,” she stated.
Tenants who have experienced financial hardship due to this scheme can seek further guidance via the DWP’s Housing Benefit and Universal Credit portal.
Changes to Benefit Deduction Rules
The DWP has also revealed plans to reduce the maximum allowable deduction from benefits for debt repayments. Currently set at 25%, this cap will be lowered to 15%, providing much-needed relief to over 1.2 million households.
This reduction is expected to save affected households up to £420 per year. “The aim is to create a benefits system that does not leave individuals in persistent financial distress,” a government spokesperson explained.
Further details on the deduction changes can be found on the UK Government’s official benefits page.
Public Reaction and Next Steps
The announcement has received mixed reactions from advocacy groups and claimants. While many welcome the compensation payments and policy changes, others argue that the delays in addressing the issue have caused unnecessary hardship.
Disability rights campaigners have urged the DWP to implement the changes as swiftly as possible. “Compensation is a positive step, but it does not erase years of financial struggle faced by disabled claimants,” said a spokesperson from Disability Rights UK.
For those awaiting payments, the DWP has assured that all eligible claimants will be contacted directly. Anyone with concerns can find additional information on the DWP’s official website.
As the government moves toward a fairer benefits system, the coming months will determine how effectively these changes are implemented and whether additional reforms are necessary to support vulnerable claimants.
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Premlata is a seasoned finance writer with a keen eye for unraveling complex global financial systems. From government benefits to energy rebates and recruitment trends, she empowers readers with actionable insights and clarity. When she’s not crafting impactful articles, you can find her sharing her expertise on LinkedIn or connecting via email at [email protected].