Personal Injury Discount Rate (PIDR)
What is the discount rate?
At the end of the case you will probably hear the term ‘discount rate’ applied to your claim and compensation, so I’ve briefly explained here what it is.
In Personal Injury cases (of which Birth Injury and HIE Litigation is a type) The injured party (the Claimant) will usually receive payment to compensate for an injury caused by another person/company/organisation’s negligence.
In Personal Injury cases the aim is ‘to place the injured party as nearly as possible in the same financial position he or she would have been but for the accident.’
This is achieved by assessing how the injury has affected the person and paying them a sum of money, either as a lump sum and/or regular annual payments.
Annual/Periodical payments are regularly indexed-linked to carer wages, and removes them from the equation of applying the discount rate. They are made for life and are managed by whoever caused the injury (the Defendant). As such claimants needn’t worry about these. The defence deal with investment and are bound by the terms of the settlement.
However, the lump sum is subject to a ‘discount rate’ which is simply a mechanism to reduce the risk the claimant is under or over compensated.
In normal circumstances the injured party will invest the money in low risk investments which aim to provide income for the remainder of their life.
Injury cases (including birth) fall into two main areas. With or without capacity. Capacity in law is simply an understanding of how to manage finances when reaching 18. If a child has capacity their lump sum will usually be put into Trust for when they reach adulthood. If they do not then a court appointed Deputy is put in place to manage their finances.
The discount rate is set by the Lord Chancellor and is reviewed every 5 years. It was reviewed and changed in 2024. The Lord Chancellor confirmed a new rate at a 0.5% discount rate which took effect on 11 January 2025. Prior to this it was -0.25%.
It is worked out by the Government Actuary’s Department using analysis of the investment markets and relies on using low risk investments. It reflects economic conditions, investment returns and the potentional future changes.
Basically, if it is negative (as it was until 2024) the lump sum is higher. The change to 0.5% means the lump sum awarded is less.
There was a scramble to get cases finished to benefit from the better rate, but now in 2025 we just have to accept the status quo.
