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Victims of the Windrush scandal will be paid as much as 75% of their compensation in advance under an overhaul of the scheme designed to deliver faster justice.
Victims will also be compensated for the first time for lost contributions to work or personal pensions, something campaigners have long fought for.
The Home Office also said priority would be given to applications from those aged 75 and over and those with serious health conditions to ensure that elderly and vulnerable people are compensated more quickly.
Immigration fees paid because a person was unable to prove their lawful status will also be reimbursed.
The home secretary said it was “unacceptable that many victims were still waiting for compensation” years after the scandal broke.
“That changes today. We will deliver justice so that those suffering financial hardship through no fault of their own are paid for their lost pension savings,” Shabana Mahmood said. “The Home Office Windrush scandal was a shameful stain on our history. I will leave no stone left unturned until everyone affected receives the justice they deserve.”
The chair of the Windrush National Organisation, Bishop Desmond Jaddoo, said: “We welcome this. We have long raised issues about pensions so it’s good news the Home Office has finally addressed this.
“We also know that once the Home Office makes a compensation offer, it is never reduced, so it makes sense to give the claimant the option to be paid 75% of that pending an appeal, it helps the financial burden people face.
“It is progress in the right direction, but there is still a lot of work to be done. New issues are emerging every day of the week. The dynamics are constantly changing.”
The Windrush compensation scheme (WCS) was launched in April 2019 to compensate members of the Windrush generation for losses they suffered when they were wrongly classified as illegal immigrants.
Many were detained and deported years after legally settling in the UK from former British colonies in the Caribbean, often as children, but were never provided with documents “proving” their status.
Claimants have long criticised lengthy delays, excessive bureaucracy and insufficient legal support which meant many have been denied compensation or have not received as much as they were owed.
Many said they were only able to secure adequate compensation after seeking legal advice and requesting reviews.
The co-founder of the Windrush Defenders legal support group, Anthony Brown, said: “Any improvement is welcome, but the main thing is people being able to put in viable claims, and that’s not happening because people don’t have the necessary legal assistance.
“People are getting nil awards, and then when they do get legal assistance, they’re getting six-figure sums. So yes, it’s great to be awarded for your pensions, but if you don’t have the assistance to make the claim in the first place, you’re not going to get that award.
“People have to have justice, and if you’re not aiming for justice, then tinkering around the edges is just going to frustrate people really.”
The WCS was ordered last month to pay £25,000 to Thomas Tobierre, 71, who spent £14,000 of his private pension when he could not work because he was unable to prove his immigration status.
He was originally told private pension losses were excluded from claims. His wife, Caroline, died of cancer before receiving any compensation from her claim.
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Under the new rules, victims who request a review will receive up to three-quarters of their final award while the review is completed. Pension compensation will include people forced to withdraw money from their pension to support themselves during the scandal.
The changes, which will be applied retrospectively, follow recommendations by the independent Windrush commissioner, Rev Clive Foster, who was appointed in June to help represent victims.
Responding to the announcement, Foster said: “These changes reflect what I’ve heard from survivors and will make a real difference, especially for those who don’t have time on their side. But delivery must be swift and sustained.”
He said progress on employment losses was welcome, but that the failure to address future earnings losses remained “a serious gap”.
“Survivors of the Home Office Windrush scandal deserve full and fair compensation. Trust will only be rebuilt through action, and I will continue to press for progress on all my outstanding recommendations,” he said.
Foster has previously demanded urgent reform, and said it was deeply concerning that 66 people had died while waiting for compensation.
The migration and citizenship minister, Mike Tapp, will announce the compensation scheme overhaul at the Windrush National Organisation conference in Birmingham on Friday.
The government said £116m had been paid out across 3,501 claims as of August, and that more than 93% of claims had received a final decision.
The government set up a £1.5m advocacy fund in April to support claimants, but campaigners are calling for legal aid. Research has shown that those who challenged their awards after taking legal advice received huge increases in the amount they were offered.
