How will my compensation affect my benefits? OMM Solicitors
Published 21st November 2019 | Medical Negligence, Trusts

How will my compensation affect my benefits?


If you have suffered from Medical Negligence and are seeking compensation, you may well be unable to work and have no choice but to rely on state benefits. However, many of these benefits involve a limit on the amount of savings you are allowed to have, which could mean that your compensation will leave you ineligible for these benefits.

While this may not seem important if you have been awarded a large sum, the position could be more problematic than it seems. So what benefits might you lose, and what can you do about it?

Why might you need to claim compensation for Medical Negligence?

When you are in the hands of a medical professional, the overwhelming likelihood is that you will receive excellent care. However, they are only human and mistakes do happen. Sometimes the mistake will be significant enough that you will experience serious pain, suffering, or disability as a result.

This may involve services provided by the NHS or private providers, and examples could range between surgery in hospital, medication prescribed by a GP, dental work or cosmetic surgery. Negligence in any of these procedures, and many others, could entitle you to claim compensation.

In order to qualify for compensation for Medical Negligence, you would need to prove that the negligence has directly caused you pain or suffering. You would also need to prove that the error was avoidable. For instance, if a doctor misdiagnosed your condition due to ignoring symptoms, that would be negligence, whereas it would probably not be if the relevant symptoms were still undetectable at the time.

How could this affect your benefits?

Most state benefits are means tested, meaning that if your total savings or capital are above certain levels, you will receive either a lower rate of benefit or none at all. Benefits that may be affected by this include:

  • Universal Credit
  • Income Support
  • Income Based Jobseeker’s Allowance
  • Income-related Employment and Support Allowance
  • Council Tax Support/Reduction
  • Housing Benefit

Other things that could be affected by having savings above the cut-off level include free prescriptions, eye tests or dental work, as well as the level of contributions you may be asked to make towards home or residential care.

There will normally not be any change in your entitlement to means-tested benefits for 52 weeks after receiving compensation for Medical Negligence, which should allow you time to spend any large, one-off sums. This may, for example, include alterations to your home that will make it easier to cope with your condition. However, the benefits agency is likely scrutinise your spending during this period to ensure that it is appropriate.

After 52 weeks, however, the money that is left will be assessed as part of the means testing. If your total capital (compensation plus any other money you may have) exceeds £6,000, your benefits will normally be reduced accordingly. If it is above £16,000, all means-tested benefits will normally be terminated.

hoistWhy would you need benefits after you have received compensation?

At first sight, it may seem strange that anyone who has received a compensation pay-out for Medical Negligence would still need benefits. However, there are a number of reasons why this might well be the case.

For one thing, it depends on how much compensation you have been awarded. If, for example, you receive £50,000 for a lesser case of negligence, this would not last very long if it has to take the place of any benefits you have been relying on. This would mean, in effect, that you have had no advantage from your compensation.

A more serious problem comes when you have received a large sum, which is intended to fund a substantial level of specialist care and equipment for the rest of your life. If, for instance, you could anticipate perhaps living a further fifty years, this could add up to a very significant amount of money over that time. You may also need to draw on your compensation many times for large amounts to renew or replace major adaptations, for instance to your home or car.

This could mean that you are going to need all the compensation that you receive to fund your care throughout your life and ensure that you enjoy a good standard of life. In this situation, claiming appropriate benefits to cover the essentials of living can make difference between the compensation lasting or running out later in your life.

How can you ensure that compensation will not affect your benefits?

Fortunately, there is a way around the “catch 22” of losing benefits because you have been awarded compensation for Medical Negligence. This is to set up a Trust Fund to protect your assets.

A Trust is a legal arrangement by which one person (the settlor) transfers assets to a small group of people (the trustees), who are legally obliged — with varying extents of discretion — to administer them on behalf of one or more others (the beneficiaries). In the case of a Trust to administer your compensation, you will be the beneficiary, and you can also be one of the trustees if you choose, although there must be at least one other.

There are several different types of Trusts, some of which are aimed at preserving an inheritance until your children come of age or protecting assets from tax. For administering a compensation award, however, the most suitable type is one that allows you to draw a regular income, as well as calling on larger amounts as required.

The advantage of a Trust is that the money no longer legally belongs to you, even though you can draw on it. This will enable you to receive whatever you need throughout your lifetime, without your savings going over the threshold for reducing or forfeiting your means-tested benefits.

You will, of course, have 52 weeks after being awarded compensation to arrange setting up your Trust. This should be enough time, but it is a complicated legal process. To be certain, therefore, it would be as well to discuss this with your solicitor when you begin your claim, so that the process can at least be prepared in advance.

At Osborne Morris & Morgan our Medical Negligence and Trust teams work closely together to ensure you receive the best advice and service for both aspects. If you would like to know more about Medical Negligence compensation or setting up Trust Funds, please contact our specialists on 01525 378177 or contact us online.

Share This:
Tweet Post Share
Osborne Morris & Morgan is an award-winning and nationally-recognised firm of solicitors. Based in Leighton Buzzard our team of solicitors serve Milton Keynes based clients and the surrounding areas.


Sign up to our eNewsletter and keep up to date with legal and OM&M news, delivered straight into your inbox!

If you would like to receive our regular newsletter, please follow this link and complete the form:

Newsletter Signup Form

Why you should choose OM&M


were likely or certain to

recommend us


said our staff

listened well


said our staff were

very informative


were very satisfied with our overall

level of service


said it was very easy to

understand information


said our staff were very good at

giving information

With the head office in Leighton Buzzard, Osborne Morris & Morgan Solicitors acts for people locally, in the surrounding Home Counties and throughout the UK.

Osborne Morris and Morgan Limited is authorised and regulated by the Solicitors Regulation Authority.
SRA number: 815734
Company Number: 12622717

Tim Woolford LLB – Managing Director
Paul Lockhart – Finance Director

© 2022 by Osborne Morris and Morgan Limited. All rights reserved. Disclaimer