Personal injury discount interest rate decision expected next month

The UK Government will announce by 31 January its decision on the interest rate used in calculating discounts relating to personal injury compensation, the Ministry of Justice confirmed today.

The rate assumes the interest that will be earned by investing damages for future loss, therefore reducing the initial capital payment. The current rate was set in 2001, and claimants' lawyers argue that with interest rates having fallen to close to zero during and since the recession, this penalises claimants.

Legal proceedings had been begun by the Association of Personal Injury Lawyers (APIL) due to a delay of more than four years since a consultation on the issue closed.

Peter Todd, of London law firm Hodge Jones & Allen, who acted for APIL, commented: “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. I am delighted that a date for the conclusion of the review has now finally been announced. I hope the new rate will fairly reflect risk-free index-linked Government investment bond returns net of income tax and hence the rate will be very substantially reduced.” 

However Kennedys, which acts for defenders, said any change to the discount rate needed to reflect the Ministry of Justice’s own research that personal injury claimants do not simply put their damages into low-risk investments.

Partner Christopher Malla said: "The reality is that claimants put their damages in a mixed portfolio of investments, and there is good evidence that claimants have been able to achieve real rates of return, net of tax, of up to and above 2.5% that way.”