The Department for Work and Pensions (DWP) has issued a fresh update on the ongoing compensation payments to benefit claimants who lost out financially when moved from legacy benefits to Universal Credit (UC).
While the majority of affected claimants have received payments, an estimated 13,000 people with more complex cases are still waiting — and the DWP aims to resolve these by September 2025.
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Who Is Affected?
The compensation scheme relates specifically to people who were receiving the Severe Disability Premium (SDP) under legacy benefits such as Employment and Support Allowance (ESA) but lost it during the transition to Universal Credit before income protections were introduced in 2022.
Key Points:
- Around 57,000 people were affected.
- Most have now been compensated.
- Around 13,000 cases remain due to data issues or inactive claims.
- Payments are being made in line with rulings from two High Court cases (2018–2019).
- Estimated individual compensation could exceed £5,000.
- The total cost of the DWP compensation exercise: £452 million.
Why the Compensation Is Being Paid
When disabled claimants moved from legacy benefits to UC, they lost approximately £180 per month in benefits due to the removal of the SDP — despite reassurances from the government that protections would be in place. After losing a legal challenge in 2020, the DWP began issuing compensation to those affected.
The High Court found that the DWP failed to treat disabled claimants fairly, and in some cases, claimants lost access to crucial income support that directly affected their quality of life.
Who Is Eligible?
To be eligible for compensation, a claimant must:
- Have moved from a legacy benefit that included the Severe Disability Premium, and
- Have transitioned to Universal Credit before February 2022, when protection rules were introduced.
They must also meet one of three specific criteria at the time of their transition, such as:
- Living alone or without a carer,
- Receiving qualifying disability benefits (like PIP or DLA),
- Not having another adult in the household receiving Carer’s Allowance.
These conditions are reviewed case by case, and evidence must be submitted if requested.
Compensation Rates
Back payments are calculated based on the monthly loss of income experienced between the date of the claimant’s move to UC and February 2024, when new rules fully kicked in.
There are five possible compensation bands, reflecting:
- Different personal circumstances,
- Length of time affected,
- Severity of financial loss.
While specific monthly rates were not detailed in the DWP’s most recent release, law firm Leigh Day, which led the legal challenge, estimates total compensation could exceed £5,000 per person.
What Claimants Should Do
The DWP is proactively contacting eligible claimants, but if you believe you were affected and haven’t been contacted, you should:
Reach out to the DWP directly.
Gather documentation of your benefits history.
Consider getting support from a welfare adviser or legal aid service.
Keep any letters from the DWP regarding your ESA and Universal Credit transitions.
“We are fully committed to identifying claimants that are owed arrears and providing the financial support to which they are entitled,” said a DWP spokesperson. “Errors like this one should not happen and we have taken action to avoid them in the future.”
FAQs
What caused the need for compensation?
The transition from legacy benefits to UC caused many disabled claimants to lose their Severe Disability Premium, amounting to hundreds of pounds in monthly income.
How much compensation will I receive?
Amounts vary, but estimates suggest up to £5,000+ could be paid out per claimant, depending on length and severity of underpayment.
What if I’m not contacted by DWP?
You should reach out proactively if you believe you’re eligible. Claims are reviewed individually, so you may still qualify.
