I need some advice for a customer that has been referred to us. Back in 1988 she recieved a sum in the region of £150,000 as a compensation payments following a severe injury. At the time she was advised to put about £130,000 of this money into an Income Bond, of which she has been drawing a monthly income to support her living along with her DLA and her CTC. I need to know how this bond will effect her entitlement to Income Support? Will the monthly income that she draws from the bond only be taken into account as it usually is? Or can it all be disregarded as it is compensation? Also this bond is about to mature, as it is compensation can it be treated like any other compensation ie if she puts it in a trust fund it can be totally disregarded? I have tried to ask the DWP but they wouldnt commit to an answer.
Any advice greatly appreciated.

My understanding of the regulations about personal injury payments
are that any payments from a trust set up from an award made because of a personal injury are disregarded and annuiuty purchased from the fund are also disregarded.

My thoughts and questions are
So yes I think the money from the bond maturing should be ignored if a trust is set up with this money or she buys an annuity with it. But I haven't looked to see if there is a time limit to these rules though.

Questions
Why was she advised to buy bonds and not advised to set up a trust or buy an annunity ?

You say she is only getting DLA and CTC.
It feels she may have lost out since 1988 and could have been getting income support!

Thanks for you help.
Not sure why she was advised in 1988 to do this but she has definately lost out. She also bought a house and took out a mortgage at the time!!
I cant find anything out about the time rules with setting uo a trust either and I cant get and answer from the DWP.

I'm afraid this isn't much help, but I recall - maybe wrongly - seeing something that said the trust had to be set up when the compensation was awarded. Hopefully, someone else can say I am wrong.

The commentary to paragraph 12 of schedule 10 of the IS Regs suggests not. It States "furthermore, since para 12 refers to funds 'derived' from personal injury compensation, it is certainly arguable that the disregard should also apply even if the compensation was initially used for other purposes before being placed on trust......the purpose of the disregard is presumably to allow such compensation payments to be used for the person's disablement needs that have arisen as a result of the injury. The fact that the funds have been employed elsewhere for an intermediate period would not seem to affect this policy intention".

Just what I was after thanks very much.

I'd found the same commentary and was going to post it last night but for some reason the site was running incredibly slowly. It is worth making the point that this is an assumption by the editors and there has never been a reported (or perhaps even unreported) case on the issue; but then the editors include some very distinguished people and it may go back to Mesher's editorship, so...

However I think there seems to have been some confusion about payments out of the trust fund, which are definitely treated as income or capital in a beneficiary's hands once they are paid out. There may be some confusion about the disregard of the value of the right to receive money from a trust, which would otherwise be part of a claimant's capital, since an equitable interest of this sort is something which is certainly sellable and has a real market value.

i think i disagree with Ariadne; if there WAS a PI trust, then any income from it should also be disregarded (otherwise, what's the point?) and my understanding has always been that income as well as capital from a PI Trust are indeed disregarded.

Going back to the original question, however, I am worried that there is NOT a PI trust here....

in which case, all your client's capital and income are to be taken into account for any means tested benefit, unless Paul's point is valid and it would have to be tested...

See paragraph 15 of Sch 9 to the regs: regular payments are disregarded to the extent of only £20 a week if used for normal living expenses (of the sort IS/HB/CTB are intended to cover: only disregarded in full if used for other expenditure. If income is not paid out regualrly it's likely to be payments of capital instead., I think.

The point is that the capital is totally disregarded.

The other point is that the deprivation of capital rules don't apply to setting up a PI trust, so, assuming it's not too late (as suggested by the editors) to transform this money into a PI trust now, then there should be no problem in doing so.