Consultation on the change to the Discount Rate - written by Mark Thomason, Deputy Head Clinical Negligence

Consultation on the change to the Discount Rate

The ‘discount rate’ is an important factor that needs to be properly understood when an individual is bringing a personal injury claim. The premise of the discount rate is that an individual were awarded a lump sum for personal injury, they would have an opportunity to invest the money and potentially receive a return on the investment.

At present the current discount rate is actually set at a negative of -0.75% which in fact suggests that an individual would lose money if they were to invest it. As such the payment for compensation for future care has effectively increased.

The discount rate is something which is regularly reviewed and at the end of November. The early suggestion is that there is consideration for dual rates to be applied. The extent of the nature of these rates is not yet clear however the Lord Chancellor has called for evidence to consider this in full. It could well be that this is to deal with the scale of the increase that this causes to some aspects of personal injury damages.

It is clear to see that this is and could be an exceptionally complex change if it were to take place. It could impact value adversely for either the defendant or the claimant depending upon how the rates would be split. It could also cause an increase in arduous arguments about which category damages fall under to take advantage of the changes.

Whatever the outcome there is plenty of time for both claimant, defendants, and insurers to have their say on the matter. This is the start of a long consultation with the estimated time of three years to fruition. We are of course at the start of the process, but it will be interesting to see the direction it will take after the first meeting at the end of this month.