Final Call on the MoJ Discount Rate Consultation for Personal Injury Settlements


The Ministry of Justice consultation on calculating the PI Discount Rate was announced just a month after a decision was made by Lord Chancellor and Justice Secretary, Elizabeth Truss, to lower the Discount Rate from 2.5% to minus 0.75%. The consultation closes on Thursday 10 May 2017. Prior to 20th March 2017, the Discount Rate had not changed since 2001.

The decision is likely to have significant implications on the insurance industry and large personal injury liabilities, particularly the NHS, in respect of the potential additional costs relating to personal injury claims. Insurers will therefore be heartened to hear a review will take place that will consider how and when the rate should be changed. Lord Chancellor, Elizabeth Truss is considering handing responsibility for setting the rate to an independent body.

The consultation will be an important step to consider options for reform including:

  • Whether an independent body should set the Discount Rate in future
  • Whether more frequent reviews would improve predictability
  • Whether the methodology is appropriate for the future
  • Certainty for all parties

The actual lump sum compensation accepted by a Claimant is adjusted according to the interest they can expect to earn by investing it. The Court will apply the Discount Rate with the percentage linked in law to returns on the lowest risk investments.   Using the Discount Rate should put the Claimant in the same financial position had they not suffered life changing injuries which includes compensation for loss of future earnings and care costs.

Lord Chancellor Elizabeth Truss offered comfort to Claimant Lawyers saying victims should be paid damages that compensate them ‘fully.’ It is important to ensure the rate set is to put the Claimant in the position to the greatest extent possible and fulfill the principle of full compensation.

The new Discount Rate will have a significant impact on the likely level of compensation awarded and will be used in support of the Claimant’s argument that costs claimed are proportionate. In terms of varying existing Costs Budgets upwards on account of the Discount Rate, it will now be considered whether the impact of the Discount Rate on the issue of proportionality will warrant upwards revisions of Budget.

If anyone has a contribution to make towards the latest Discount Rate consultation, we would urge them not to forget Thursday’s deadline.

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