Light at the end of the Discount Rate tunnel in Northern Ireland

Having progressed through what has seemed like more stages than are encountered by a participant in the Tour de France, the Damages (Return on Investment) Bill was given Royal Assent and enacted on 2 February 2022. Enter The Damages (Return on Investment) Act (Northern Ireland) 2022.


The personal injury discount rate is a percentage used to adjust lump-sum awards of compensation for future financial losses (such as loss of earnings) and costs (such as care costs) to account for the amount a claimant can expect to earn by investing their award.

In Northern Ireland, the discount rate was previously set at 2.5%, under the Wells v Wells methodology. However, the Department of Justice considered that this rate risked under compensating plaintiffs. As such, in February 2020, the Minister for Justice indicated that a change to -1.75% was under consideration.

A public consultation ran from June to October 2020, seeking views on various proposals as to how the rate should be calculated. Kennedys responded to the consultation, highlighting the risks that such a significant change would present. However, rather than allow the planned Damages (Return on Investment) Bill to pass through the Assembly as planned (before setting the rate), the Department proceeded to bring forward secondary legislation which changed the rate, on an interim basis, to -1.75 % from 31 May 2021.

Next steps

The interim discount rate of -1.75% has had a significant impact on the overall value of serious and catastrophic injury claims, leading to a ‘test’ case being taken before the High Court in order to determine how the discount rate should now be applied.

The enactment of The Damages (Return on Investment) Bill has overtaken the determination of that test case, and the position now is that the Government Actuary has 90 days from 2 February 2022, within which to review the discount rate using the methodology prescribed in the Act.

However, the Department for Justice has been liaising with the Government Actuary’s Department for some time now and therefore, it is expected that they will have completed their review well within the 90 day period and therefore, a new rate will be set sooner rather than later.

On the evidence presently available, the new rate is likely to be -0.75%, which would bring some welcome relief for insurers and other compensators.

It will certainly be positive news for all stakeholders that Northern Ireland will finally have a stable discount rate. 

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