Bill proposes changes to PI discount rate calculation

Changes to the way the personal injury discount rate for serious injuries is calculated are included in the UK Government's Civil Liability Bill, laid before the House of Lords yesterday.

The discount rate is applied to awards for periods of years in the future, and reflects the presumed return claimants will receive from investing their compensation money.

It has been controversial because it had remained unchanged in the face of declining investment returns until last year, when the then Lord Chancellor Liz Truss approved a major change from +2.5% to -0.75%, which had a major effect on damages calculations.

The changes now being introduced will:

• set the rate with reference to "low risk" rather than "very low risk" investments as at present, better reflecting evidence of the actual investment habits of claimants, according to the Government;
• establish a regular review of the rate, the first within 90 days of the legislation coming into force and at least every three years thereafter; and
• establish an independent expert panel chaired by the Government Actuary to advise the Lord Chancellor on the setting of the rate.

Also in the bill are provisions for England & Wales to control the payouts for claims for whiplash injuries, which the Government believes are subject to high levels of fraud with motorists now set to benefit from lower premiums, but which many solicitors fear will mean genuine claims going undercompensated and claimant legal firms going out of business.

Publication of the bill itself is awaited. Click here for the latest position.