Lord Chancellor announces new discount rate for personal injury claims

The Lord Chancellor has announced a change to the way personal injury compensation payments are calculated – setting the Discount Rate at minus 0.25%.

  • Personal Injury Discount Rate increased to minus 0.25% following extensive review
  • New rate offers more balanced approach to compensate personal injury claims
  • The new rate will be reviewed within five years by an independent expert panel

When victims of life-changing injuries accept lump sum compensation payments, the final figure they are awarded is adjusted via a calculation known as the Discount Rate. This is to reflect the interest they can expect to earn by investing such payments, as well as the effects of tax, expenses and inflation on these returns.

Compensation awards using the rate aim to put claimants in the same financial position had they not been injured, including loss of future earnings and care costs.

The current rate of minus 0.75% has led to concerns that claimants were being substantially over-compensated, increasing financial pressure on public services that have large personal injury liabilities, particularly the NHS.

Today’s decision comes after an extensive review – which formed part of reforms set out in the government’s Civil Liability Bill 2018 – to ensure a more balanced approach that would give victims full and fair compensation.

It was informed by a public Call for Evidence which took a wide range of views, including from personal injury layers, insurers, investment experts and public bodies – with the new rate coming into force on 5 August of this year.

Under the Civil Liability Act 2018 the new personal injury discount rate will be reviewed within a five-year period, with future reviews advised by an expert panel and required within five years of the last.

Lord Chancellor and Justice Secretary David Gauke said:

It is vital victims of life-changing injuries receive the correct compensation – I am certain this is the most balanced and fair approach following an extensive consultation.

It is also right that the rate is informed by experts and reviewed on a regular basis to make sure this important calculation is accurate every time.

An announcement was made the London Stock Exchange this morning with information provided to industry bodies. A Statement of Reasons has been laid in Parliament alongside the rate announcement.

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