A not-for-profit organisation
committed to injured people
A not-for-profit organisation
committed to injured people

Discount rate formula must be reassessed

15 Apr 2024
APIL news

Assumptions about how severely injured people invest their compensation do not reflect reality and must change ahead of the forthcoming discount rate review, APIL has warned the Ministry of Justice (MoJ).


APIL has responded to the MoJ’s call for evidence Setting of the Personal Injury Discount Rate.


“The Government said in this call for evidence it is committed to the principle of 100 per cent compensation and it must now deliver on that principle,” said APIL (the Association of Personal Injury Lawyers) president Jonathan Scarsbrook.


“The Civil Liability Act requires the assumption that damages are invested in a portfolio which is less risky than that of an ordinary investor. The Government did not do that when the rate was set in 2019.


“At that time, even with the Lord Chancellor’s 0.5 per cent adjustment to reduce the projected level of under-compensation, a third of claimants were still expected to be unable meet their total financial losses,” said Jonathan.


“One of the realities is that claimants are usually advised to invest through a discretionary fund manager who can actively manage the portfolio,” he went on. “The actual cost of this must be taken into account, as must the increased tax burden, with personal allowance not moving over time and with capital gains tax and dividend allowances falling back significantly since 2019.


“When taken together, the impact of these realities on catastrophic injury claims, where damages payments can easily reach £10 million, can be huge.


“Our evidence shows that the current 0.75 per cent allowance to account for tax and investment management is woefully inaccurate and that the actual figure of around 2.5 per cent each year, would be much more appropriate,” he said.


“I am aware of some deeply unedifying comments from some in the insurance industry about the impact of the discount rate on insurance premiums,” said Jonathan.


“But compensation is not a lottery win and neither is setting the discount rate a hypothetical maths problem. We are talking about very unfortunate individuals - and one day any of us could be in that position - who have suffered the most devastating injuries. Damages are often required to meet all financial needs for the rest of an individual’s life.


“The discount rate is not about insurance premiums. Its purpose is to ensure catastrophically injured people receive proper compensation. Their needs must always be put first when setting the rate.”


Notes to editors:

  • Link to APIL response to the MoJ call for evidence – Setting the Personal Injury Discount Rate: https://www.apil.org.uk/files/pdf/ConsultationDocuments/4213.pdf
  • The Association of Personal Injury Lawyers is a not-for-profit organisation, formed by claimant lawyers, which has campaigned for the rights of victims of negligence for more than 30 years. APIL’s vision is of a society without needless injury but, when people are injured, a society which offers the justice they need to rebuild their lives. Members include solicitors, barristers, legal executives and academics.
  • Any queries about this press release should be directed to APIL’s press and communications officer Julie Crouch on t: 07808 768623, e: [email protected] or communications manager Jane Hartwell on t: 07541 490 988 e: [email protected].
  • Follow @APIL on X: https://X.com/APIL and on LinkedIn here: https://www.linkedin.com/company/association-of-personal-injury-lawyers.

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