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The Lord Chancellor, Shabana Mahmood, has today announced the personal injury discount rate (PIDR) in England and Wales will remain as a single rate, but has been adjusted from -0.25% to +0.5%. The change will become effective as of 11 January 2025. This increase in the PIDR follows the discount rate changes in Northern Ireland and Scotland which were also recently set at +0.5%.
Implications
Claimants with a claim for future losses will see their damages on settlement reduce, due to the compensatory effect of improving investment conditions. Public authorities and insurers will revalue their portfolios of claims especially for catastrophic personal injury and high value clinical negligence claims. For public authorities this will reduce the amount of damages on settlement and allow for potential redirection of public funds.
The higher the life expectancy, the greater the impact that the increase in discount rate will have on damages. Those cases with minimal future losses will not be overly affected by the change in discount rate.
The table below shows the decrease in multiplier from a discount rate of -0.25% to +0.5% and how this changes the value of future losses when using a hypothetical claim of £200,000 per annum when applying different multipliers.
| Term (Ogden Table 36) | Multiplier with discount rate of -0.25% | Multiplier with discount rate of +0.5% |
| 5 years | 5.03 | 4.94 |
| Total | £1,006,000 | £988,000 |
| 10 years | 10.13 | 9.75 |
| Total | £2,026,000 | £1,950,000 |
| 15 years | 15.29 | 14.45 |
| Total | £3,058,000 | £2,890,000 |
| 20 years | 20.51 | 19.03 |
| Total | £4,102,000 | £3,806,000 |
| 25 years | 25.8 | 23.5 |
| Total | £5,160,000 | £4,700,000 |
| 30 years | 31.16 | 27.86 |
| Total | £6,232,000 | £5,572,000 |
| 35 years | 36.58 | 32.12 |
| Total | £7,316,000 | £6,424,000 |
As illustrated in the table above the reduction in value of a claim with future losses of £200,000 for a period of 35 years, when applying the new rate of +0.5% is £892,000.
We anticipate that claimants with large future loss claims may well be advised to opt increasingly for smaller retained lump sums and more heads of loss by way of periodical payments, due to lower lump sum awards under a higher discount rate. Time will tell what balance will be struck between the forms of awards sought by claimants.
Comment
We welcome the Lord Chancellor’s review which has been thorough involving meetings with stakeholders, numerous consultations and the appointment of a panel of experts. The increase in PIDR is fair in light of the current economic climate and the investment returns available. The increase from -0.25% to +0.5% and corresponding reduction in a claimant’s damages on settlement will enable public funds to be redirected to frontline services, including patient care in NHS claims.
Related items:
- New +0.5% personal injury discount rates announced in Northern Ireland and Scotland
- Personal injury discount rate in England and Wales: exploring the options
- Catastrophic injury cases: discount rates in Ireland to remain at 1% and 1.5%
- Government response to Personal Injury Discount Rate Call for Evidence: an overview and next steps
United Kingdom