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Severe Disability Premium backpayment. Is it disregarded as capital? Can I spend all this money?

freeallbadgers

Hi everyone,

I'm on Income Related Employment and Support Allowance and PiP. Recently I was awarded backpayments for SDP of two amounts, one for around £4000 and the other in the area of £9000. From what I understand is that both of those payments will be disregarded as savings/capital for 52 weeks and possibly the £9000 payment may be disregarded for the life of the ESA claim but I have had no official acknowledgement of this.

My query is ... can I in theory, just spend all this money?. Or in a years time will the DWP ask me to justify what I've spent the money on?. I know I should be grateful/happy for this windfall but my anxious mind can't help thinking there will be a sting in the tail somewhere along the line.

Thanks in advance

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Ross_Alumni

Hi @freeallbadgers

I'm sorry that you haven't received an answer to this yet, I just wanted to let you know that your discussion has been tagged as unanswered so hopefully you will receive a reply soon

OverlyAnxious

I had the same question last year and was never able to find any reliable hard evidence for the 52 week disregard. Several (trustworthy!) people told me I could spend it without repercussion's in 52 weeks, exactly as you've suggested, and that does seem to have been the case...

It hasn't stopped me worrying about it though! I don't know about the £9k lifetime disregard.

freeallbadgers

Thank you for your reply @OverlyAnxious. It does seem difficult to find a definitive answer on this, I think the DWP prefer everything to be deliberately vague. The over £5000 disregard came from this site ... https://www.moneyhelper.org.uk direct link:here.

Overpayments are mentioned in two sections :

1. Backdated lump sum payments from DWP

In some cases, this payment isn’t counted as savings for one year, and won’t affect your income-related or means-tested benefits during this time.

However, where benefits have been underpaid because of an error, any payments over £5,000 can be disregarded for the length of the claim or until the award ends. This could be an official error or on a point of law

2. ESA underpayments

If you're getting means tested benefits, any arrears of benefit you're owed under £5,000 are disregarded as capital for 52 weeks from the date they are paid.

If your payment is £5,000 or more, it will be disregarded for 52 weeks or until your benefit award ends, whichever is longer.

These rules also apply if you move onto Universal Credit (UC) and are owed arrears relating to legacy income-related benefit entitlement.

I "believe" my backpayment will be classed under the ESA section.

Maybe the above information will help others, Again, thanks for the reply and I will try and relax and treat myself to some upgrades for my house.

freeallbadgers

Ross_Scope

MarkM88

Does it not say on the letter you received?

freeallbadgers

@MarkN88, unfortunately it doesn't

knucklehead

I was in the same situation a couple of years ago and I was paid around £7,000 in back payment and I spent £5,000 of it on a car. I would treat your back payment as money you would have been paid in the normal way and saved up and go ahead and spend it and enjoy it.

freeallbadgers

knucklehead said:

I was in the same situation a couple of years ago and I was paid around £7,000 in back payment and I spent £5,000 of it on a car. I would treat your back payment as money you would have been paid in the normal way and saved up and go ahead and spend it and enjoy it.

thanks for that reply thats re-assuring

snailpace

Hi, I have just joined and noticed your post. I was in the same situation a few years back. I was told I had 12 months to spend it before it would be counted as savings. Enjoy the money and I hope it really helps you. I have been in a lot better place since I got through the tribunal.

freeallbadgers

snailpace said:

Hi, I have just joined and noticed your post. I was in the same situation a few years back. I was told I had 12 months to spend it before it would be counted as savings. Enjoy the money and I hope it really helps you. I have been in a lot better place since I got through the tribunal.

Thanks for the reply. I'm starting to relax about it now and now I can buy a few things that I will enjoy. Glad you got through the tribunal.

Cheers

Buchan

I'm in this exact situation right now (PIP, IR ESA, HB). I received £33,000 backdated SDP in February, and they've started doing the managed migration to UC in my area. I have epilepsy so a car is useless, and i live in a council flat, so i can't do something smart like a solar conversion. I've been terrified to just blow the money simply to retain the 'transitional protection' of the managed migration- which I'll have lost whenever I come back under the 16k threshold. I feel like I'm paying for the original 2011 "error" a second time; and I'll be poorer at the end of it all.

calcotti

If you backdated money was £33,000 it is ignored until the end of your ESA award if it results from official error or error in law (I am not sure exactly what these may cover) and, if applicable, this disregard will be extended for UC also so will not prevent you claiming UC.

Do you have any letters about the arrears which state what they are for?

Buchan

It was "Official error"- six lots of £5000 and one of 3000, all landed in my account at the same time.
So, if I'm migrated over before the 12 month disregard is up, I can claim UC with transitional protection until the end of that disregard, at which point the UC would stop? At that point, will I then have to reapply when I fall back below the upper savings threshold? (The idea of being assessed 'fresh' for UC as opposed to a simpler migration fills me with dread- 'hidden/invisible conditions' and so on)
Many thanks.

calcotti

Buchan said:

It was "Official error"- six lots of £5000 and one of 3000, all landed in my account at the same time.
So, if I'm migrated over before the 12 month disregard is up, I can claim UC with transitional protection until the end of that disregard, at which point the UC would stop? At that point, will I then have to reapply when I fall back below the upper savings threshold? (The idea of being assessed 'fresh' for UC as opposed to a simpler migration fills me with dread- 'hidden/invisible conditions' and so on)
Many thanks.

Buchan

Thanks. I'll get on that. Yeah, I was told ominously by ESA on the phone to be able to show I hadn't purposefully suppressed my capital, so it doesn't even feel like much of a disregard. This is why I've felt so stuck about it.
This is a mighty service you lay on here, it's very much appreciated. Knowledge is power!

calcotti

Buchan said:
It was "Official error"- six lots of £5000 and one of 3000, all landed in my account at the same time.
So, if I'm migrated over before the 12 month disregard is up, I can claim UC with transitional protection until the end of that disregard, at which point the UC would stop? At that point, will I then have to reapply when I fall back below the upper savings threshold? (The idea of being assessed 'fresh' for UC as opposed to a simpler migration fills me with dread- 'hidden/invisible conditions' and so on)
Many thanks.

If each payment is separate the disregard will, I think, for each be 12 months as you say. Had they all come in one go as £33000 there would be an indefinite disregard. I think there is therefore a question about whether this is one error paid in instalments or separate issues. That my be worth seeking clarification from ESA if you think it might be an issue - perhaps ask if they can clearly identify the applicable period of disregard if your letters don't already do that.

Whichever disregard applies that disregard should be carried over to UC for the remaining period of the disregard.

If only 12 month disregard applies the same issue of needing to spend the money would apply regardless of whether still on ESA or UC (without falling foul of deprivation capital rules). One thing to note, if applicable, is that paying off debt is never deprivation of capital for UC (whereas it can be treated as such for ESA).

If benefits do stop then you would be able to apply for UC once capital is below £16,000. Yes you would need a new assessment but bear in mind the health assessment for UC is the same as for ESA.

(EDIT - I suspect your post before this one is actually responding to this - I was having problems getting my post to be accepted. You must have had a notification before my post actually appeared on the forum. No idea what was going on!)

ADDED -
1) 7 separate official errors seems a lot which does make we wonder if at least some of them could be added together and might get you over £25,000 indefinite disregard.
2) I have never been clear how deprivation rules apply to a disregard. If the capital is treated as if you never had it then what you do with it shouldn't matter. If deprivation rules are applied the disregard becomes meaningless anyway.

Buchan

I've not found anything online about an indefinite disregard for 25k+?? Only the length of the current esa award/12 months(whichever is longest). They talk about the full amount in the letter as being payment for a single period.
Heres the letter and examples of the individual deposits:

calcotti

That is an idefinite disregard which lasts until the end of the ESA award. That disregard will be carried over to UC when Managed Migration takes place.

The area I am not clear about is what happens once Managed Migration of all claimants to Uc has been completed. I read the rules as possibly meaning that at that point all new disregard will become for 12 periods only but I'm not clear what happens to periods for existing disregards.

For ESA https://www.legislation.gov.uk/uksi/2008/794/schedule/9/made

1.—(1) Subject to ****-paragraph (2), any arrears of, or any concessionary payment made to compensate for arrears due to the non-payment of—
(a) any payment specified in paragraph [F5[F68, 10, 11, 66, [F772, 73 or 74]] of Schedule 8] (other income to be disregarded);
(b) an income-related allowance, an income-related benefit or an income-based jobseeker's allowance[F8, universal credit], child tax credit or working tax credit;
....but only for a period of 52 weeks from the date of the receipt of the arrears or of the concessionary payment.
(2) In a case where the total of any arrears and, if appropriate, any concessionary payment referred to in ****-paragraph (1) relating to any one of the specified payments, benefits or allowances, amounts to £5,000 or more (referred to in this ****-paragraph and in ****-paragraph (3) as the “relevant sum”) and is—
(a) paid in order to rectify, or to compensate for—
(i) an official error as defined in regulation 1(3) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999, or
(ii) an error on a point of law; and]
(b) received by the claimant in full on or after 14th October 2001,
****-paragraph (1) is to have effect in relation to such arrears or concessionary payment either for a period of 52 weeks from the date of receipt, or, if the relevant sum is received in its entirety during the award of an income-related allowance, for the remainder of that award if that is a longer period.

For UC https://www.legislation.gov.uk/uksi/2014/1230/regulation/10A

Arrears of benefit disregarded as capital
10A.—(1) This regulation applies in relation to the calculation of an award of universal credit (the “current award”) where the claimant has received a payment of arrears of benefit or armed forces independence payment, or a payment made to compensate for arrears due to the non-payment of benefit or armed forces independence payment, of £5,000 or more, and the following conditions are met—
(a) the payment—
(i) is received during the current award; or
(ii) was received during an award of an existing benefit or state pension credit (the “earlier award”) and the claimant became entitled to the current award within one month of the date of termination of the earlier award;
(b) in the case of a payment falling within ****-paragraph (a)(i), it would be disregarded from the calculation of the claimant’s capital if the claimant were entitled to an existing benefit or state pension credit;
(c) in the case of a payment falling within ****-paragraph (a)(ii), it was disregarded from the calculation of the claimant’s capital for the purposes of the earlier award; and
(d) the period of entitlement to benefit or armed forces independence payment to which the payment relates commences before the first date on which, by virtue of section 33 of the Act (abolition of benefits), no claimant is entitled to an existing benefit.
(2) Where this regulation applies, notwithstanding anything in the Universal Credit Regulations, the payment is to be disregarded from the calculation of the claimant’s capital for 12 months from the date of receipt of the payment, or until the termination of the current award (if later).

But this document says

https://data.parliament.uk/DepositedPapers/Files/DEP2019-0465/Capital_disregards_v11.0.pdf

This longer disregard will only be available on a transitional basis and will only apply to payments of arrears or compensation which relate to a period before Legacy benefits are abolished. Once migration to Universal Credit is complete and Legacy benefits are abolished, a standard 12 month disregard will apply to all new benefit arrears and compensation payments whether or not they are due to official error or errors of law.

I think this means an indefinite disregard will still apply for the existing disregards. There is more background

https://www.legislation.gov.uk/uksi/2018/932/pdfs/uksiem_20180932_en.pdf

Buchan

This is great, thank you. I called UC yesterday, told my tale and was lied to- no mention of this legislation at all. Yet the highlighted bit looks pretty clear cut, doesn't it. I shall call them again on Monday. I'll also call ESA, and if they agree with this I'll get them to put it in writing for me to show UC when I get migrated.

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poppy123456

Do be aware that when you’re ringing ESA and UC you are ringing a call centre, not DWP. They often have very limited knowledge. For this reason they are not the best people to ring.