FAMILIES who lost loved ones to coronavirus while they were working on the front line of the crisis could be stripped of their benefits after receiving the lump-sum compensation, Labour warned today.

Under the NHS and Social Care Coronavirus Life Assurance Scheme, the £60,000 payment to relatives of workers who die with Covid-19 is being treated as capital in means-tested benefits assessments.

The current limit for savings and capital, excluding the value of the main home, while claiming means-tested benefits is £16,000.

Households applying for universal credit (UC), housing benefit or pension credit have their claims rejected outright if they have savings of more than £16,000, while capital over £6,000 triggers tapered deductions.

At the time of the compensation scheme’s introduction in April, Health Secretary Matt Hancock said that “financial worries should be the last thing on the minds of their families.”

But today, Labour warned ministers that bereaved families are having to choose between benefits or a compensation payment.

The party called for the compensation payments to be disregarded as they are in the case of schemes such as those providing compensation for the Windrush scandal and the Grenfell Tower fire, as well as where claimants hold a Victoria or George cross.

Shadow work and pensions secretary Jonathan Reynolds said: “It is shocking that families are being forced to choose between accessing social security they are entitled to or the compensation they need.

“This must change so that families can grieve in peace with the full support they have every right to expect.”

At least 540 front-line health and social care workers, including doctors, nurses, porters, care home workers and paramedics, are estimated to have died from coronavirus in England and Wales.

The latest figures, from July 8, show just 51 claims for compensation received. None had been rejected at that point and 32 were still under consideration.

The Royal College of Nursing called for “urgent clarification,” saying that the payments “should not impact grieving recipients’ eligibility for welfare and other benefits.”

Dave Prentis, general secretary of health workers’ union Unison, said: “These payments are meant to provide financial security when it’s needed most, not be an excuse to make savings elsewhere.”

A government spokesman said: “It has always been one of the central principles of UC that decisions on awarding the benefit should take into account individuals’ existing ability to meet their basic needs, so that we maintain our focus on supporting families in most need.”