MoJ consults on personal injury discount rate as claimants push for cut

The Ministry of Justice has launched a consultation on setting the personal injury discount rate, with claimants arguing that it is set too low.

The rate is used in PI claims to calculate an adjustment to an injured person’s lump sump compensation over their lifetime.

Its purpose is to make allowance for accelerated receipt of the lump sum and so ensure the claimant is not over-compensated.

The Lord Chancellor set the current discount rate of 2.5% in 2001.

The consultation is to look at two broad options of whether a ‘claimant investor’ should be deemed to use minimal risk index-linked government stocks or, alternatively, a mixed investment portfolio.

Christopher Malla, a partner at defendant law firm Kennedys, said that any reduction in the rate could have a significant impact on damages paid by its clients.

This is particularly true in high-value cases attracting multi-million pounds awards.

Malla said: “The consultation on the methodology to be used by the Lord Chancellor in calculating the discount rate has been awaited for some time.

“The discount rate is the rate of return to be expected from the investment of a lump sum award of damages for future loss. Claimants have been campaigning for a reduction to the current 2.5% discount rate, arguing the return on investments is significantly below 2.5%.”

Malla said that he understood from the MoJ that the consultation was a two-part process.

“The methodology is under review in this consultation with a separate consultation to follow in the autumn to review the present legal basis for the setting of the rate and to seek views on whether the restrictions imposed by the present law on the factors that can be taken into account in the setting of the rate are still appropriate,” he explained.

More information on the consultation, which runs until 23 October 2012, can be found here