Don’t throw your compensation away

If you have received compensation as a result of a personal injury in an accident, you can use a special type of Trust – called a Personal Injury Trust – to protect what’s rightfully yours. This will stop your compensation being taken into account when and if you need to claim means-tested benefits.

It’s reassuring to know that many people who’ve suffered a personal injury in an accident are entitled to means-tested benefits at some point in their lives.

The benefits that are means tested include:

  • Income support

  • Income-based job seeker’s allowance

  • Incapacity benefit (with means tested element)

  • Local authority support in the home

  • Housing benefit

  • Council tax relief

  • Free prescriptions

  • Free eye and dental treatment

Avoiding the savings trap

  • For most government and local authority benefits, if you are under State Pension Age and you have more than £6,000 in savings, then your benefits could be drastically reduced.

  • If you are over State Pension Age and you have more than £10,000 in savings, then your benefits could be drastically reduced.

  • Above £16,000, you’re generally not entitled to receive any benefits whatsoever, regardless of your age (although there are higher limits for people in full-time residential care).

  • Once you’ve gone over the relevant savings threshold then there are rules in place to stop people already eligible for benefits giving money away with the intention of re-qualifying for those benefits once again.

The compensation you have been awarded has been given to you in order to reduce the impact an accident may have had on your life or livelihood. So why should you then lose out on your entitlement to any means-tested benefits.

Putting your compensation into a Personal Injury Trust for your own benefit ensures that it will not be means tested. It can therefore be used, very flexibly, to do what it was meant to do – working towards compensating you for the injuries that you’ve suffered.

You still retain control of your personal injury money – which is how it should be. The Trust can be closed down at any time you wish, you control who acts as Trustee, and the Trust can pay you income or capital at any time. What’s more, the Trust can buy things you need on your behalf and lend you money without necessarily affecting your benefits.

Please note that this fact sheet is intended to be a summary of the main aspects of this topic and is not exhaustive of the issues involved, it is also not a recommendation and you should obtain appropriate legal and/or financial advice before acting on any of the information provided.