The Department for Work and Pensions (DWP) has announced a new compensation scheme for benefit claimants impacted by the transition to Universal Credit. According to GBNews, the scheme will provide payments of up to £5,000 to approximately 57,000 individuals.
This compensation addresses the loss of severe disability premiums (SDP) that occurred before transitional protections were put in place, affecting many claimants who saw a reduction in their monthly income by around £180.
Background and Legal Precedents
This compensation scheme follows two critical High Court rulings between 2018 and 2019. These rulings concluded that the government failed to ensure that benefit payments were not reduced when claimants transitioned to Universal Credit. The DWP attempted to challenge these rulings in 2020 at the Court of Appeal but was unsuccessful.
A law firm, Leigh Day, which represented the claimants, estimates that compensation for each individual could exceed £5,000.
DWP’s Statement on Payment Timelines
In February 2025, Neil Couling, the DWP’s senior responsible owner for Universal Credit, confirmed that most eligible claimants would receive compensation before the end of 2025.
The DWP has clarified the following eligibility requirements and payment timelines for the compensation scheme.
To qualify for compensation, claimants must be current or former recipients of Universal Credit who received or are currently receiving Universal Credit that includes an SDP element or transitional amount.
Additionally, claimants must meet one of the following three conditions before moving to Universal Credit: they must have been entitled to an income-based legacy benefit that included the Enhanced Disability Premium, the Disability Premium, or the Disabled Child Premium.
Alternatively, they may have been entitled to Child Tax Credit with the Disabled Child Element in the non-severely disabled category.
Groups and Payment Timelines
The DWP has identified three distinct groups of claimants, each with a different timeline for receiving compensation payments. The first group consists of claimants who are due an additional SDP element from 2020 onwards and continue to receive Universal Credit.
This group is expected to receive payments by August 2025, with over 4,000 claimants already having received their compensation. Payments for this group are the easiest to process, as they can be made automatically through the DWP’s digital system.
The second group includes claimants who are due additional amounts between 2018 and 2020 and continue to receive Universal Credit. Approximately 15,000 claimants belong to this group.
Payments will begin by the end of March 2025, and despite the added complexity of converting from a manual SDP payment to the Universal Credit system, payments for this group are expected to be completed by August 2025.
The third group involves claimants who are due payments from 2018 onwards but no longer receive Universal Credit. The processing of this group’s payments is more complex because it involves individuals who no longer claim Universal Credit. Payments for this group are also expected to be completed by August 2025.
