An indication of things to come?
Louise Gardner, Senior Associate in our Serious Injury team, considers the recent change to the Personal Injury Discount Rate in Scotland and Northern Ireland.
Announcements were made in June 2024 from both the Northern Irish Assembly and Scotland, confirming the passing of regulations that would change some of the ways in which calculations of the Personal Injury Discount Rate would be made. Both jurisdictions, following changes to the parameters to the rate setting, are now identical.
On Thursday 26 September 2024 the discount rate, following their respective reviews, was announced: +0.5 % for both Scotland and Northern Ireland.
The Association of Personal Injury Lawyers (APIL) reacted to the change:
“New personal injury discount rates of 0.5 per cent were announced this morning (Thursday 26 September) for both Scotland and Northern Ireland.
“In Scotland, the rate has increased from -0.75 per cent, which was set in 2019. In Northern Ireland, the rate has increased from -1.5 per cent, set in March 2022.
“The Department of Justice in Northern Ireland said that the main reason for the increased rate is the increase in projected returns on the notional portfolio of investments.
“APIL has argued that under the previous, lower, discount rates, some injured people were still being undercompensated.”
Following the announcement, APIL Treasurer and Executive Committee representative for Scotland, Gordon Dalyell said:
“It is now even more likely that a catastrophically injured person will not receive full compensation and therefore be unable to meet the costs of their necessary care and support.
“This increase in the discount rate has potentially significant consequences for any one of us who may suffer life-changing injuries because of the negligence of others.”
Executive Committee member for Northern Ireland, Oonagh McClure said:
“Victims of negligence, who have already been through so much, should not have to face financial pressure to have their basic needs met. Injured people are particularly susceptible to the rising costs of living we’re seeing across the board, which includes increases to carer wages and the cost of specialist aids and equipment, for example.”
As a solicitor who represents individuals who have sustained life changing injuries, an appropriate Discount Rate and how that applies to future losses, is critical. For anyone who has sustained catastrophic injury, they are reliant on their claim to fund expensive and often enduring costs of care, case management, therapies and equipment.
In the economic landscape we are living in today, the costs of specialised care, support, therapies and equipment are more expensive than ever.
With this Discount Rate increasing, compensation being awarded for those life sustaining future losses will be lessened, alongside the ongoing financial difficulties surrounding the basic costs of living.
The impact and reality of this increase may be that those who have sustained personal injuries with lifelong needs will likely run out of money and may then be reliant on the state, and the taxpayer’s purse, to cover those needs. This has the potential to impact quality of care and support received, especially later in life as their compensation dwindles.
Practically speaking, for any Claimant in Scotland or Northern Ireland with a claim ongoing, this increase in the Discount Rate will have huge implications. Recalculations of Schedules of Losses and consideration of any Part 36 offers previously made, which may now put Claimants at risk, should be evaluated.
Is this increase in the Discount Rate a sign of things to come for England and Wales?
Probably. But only time will tell.
The announcement for the Personal Injury Discount Rate for England and Wales is expected to be announced by the Lord Chancellor, Shabana Mahmood, on or before 11 January 2025.
Due to the uncertainty of what will come for England and Wales, but with the Discount Rate confirmation received from the other home nations, practitioners in England and Wales may wish to have similar reflections on ongoing settlement negotiations and offers pending the announcement in the New Year.
