Discount rate for personal injury damages

The government will announce the result of its long-awaited review of the interest rate used to calculate discounts applied to personal injury compensation next month. The Ministry of Justice confirmed today it will make the announcement by 31 January – more than four years after closing a consultation on the issue.

The discount rate is set to calculate deductions from injured people’s compensation to reflect the interest the payments are assumed to earn.

The Association of Personal Injury Lawyers (APIL) has campaigned for years that the current rate – 2.5%, set by the lord chancellor in 2001 – is too high and penalises claimants.

APIL had taken the unusual step of starting legal action amid concerns about the wait for the review, and the organisation said it was relieved action will finally be taken to re-evaluate the discount rate.

‘People with lifelong injuries are continuing to be undercompensated, in some cases, by hundreds of thousands of pounds, because successive governments have dragged their heels and failed to review the discount rate to reflect changes in the economy,’ said Neil Sugarman, president of APIL.

The rate is based on yields generated by index-linked government stock.

Peter Todd, of London firm Hodge Jones & Allen, who acted for APIL, said the hope is the new rate will fairly reflect risk-free index-linked government investment bond returns and therefore be substantially reduced.

‘I have little doubt that this long-running review of the discount rate would have dragged on, unless APIL had started legal action challenging the delay,’ he said.

‘I am delighted that a date for the conclusion of the review has now finally been announced.’

A Ministry of Justice spokesperson said: ‘The lord chancellor is reviewing the discount rate applied to personal injury claims to ensure personal injury claimants are properly compensated. The results of that review will be announced in due course.’