Personal injury discount rate increased to +0.5% in England and Wales

What is the discount rate?

The Personal Injury Discount Rate (PIDR) is the rate used to calculate future financial losses at their current value, taking into account early receipt and the fact claimants have the benefit of damages now, can invest them and achieve a return for their investment. Since 2017, this discount rate has been negative, to reflect the fact a claimant’s compensation is not likely to keep pace with inflation, even if prudently invested. 

As many will know, the Civil Liability Act 2018 specified a new methodology for setting the PIDR, meaning the Lord Chancellor must review the rate every 5 years. Following a review, having regard to the rate of return a claimant could reasonably expected to receive if they invested their damages, the Lord Chancellor has determined the discount rate be increased from -0.25% to +0.5%, effective from 11 January 2025. This brings the rate in line with the recently announced new rates for both Scotland and Northern Ireland. 

What does this mean?

This change will affect the amount of damages claimants receive (though, given its purpose, claimants will still receive full compensation as the discount rate should not mean that claimants have less in their pockets longer term). Defendants and their insurers should make sure any settlements from 11 January 2025 reflect the increase to avoid overcompensation and should ensure offers made before this date accurately reflect the value of the case.