Discount rate for PI claims review
Lord Chancellor agrees to review discount rate for PI
claims
(Press release from Association of Personal
Injury Lawyers)
9 November 2010
Agreement by the Lord Chancellor to review the
discount rate, after increasing pressure from lawyers, has been
welcomed by the Association of Personal Injury Lawyers
(APIL).
The discount rate is used to calculate the
amount deducted from an injured person’s compensation to account
for any income he may receive from investing his damages. The
discount rate set by the (then) Lord Chancellor in 2001 was based
on yields generated by index-linked government stock (ILGS) and was
calculated at 2.5 per cent.
“Since that decision was made, yields on ILGS
have gradually declined,” said APIL president Muiris Lyons.
“Over the last three years the average gross yield has been less
than one per cent.
“For years now, injured people have been
undercompensated because of the previous Government’s failure to
review the discount rate in light of economic changes,” he went
on. “When the current Lord Chancellor did not respond to our
request for a review, we had little option left but to indicate
that we would judicially review the matter.
“Our hope now is that the Lord Chancellor’s
review proceeds quickly and redresses this imbalance which has had
such an impact on injured people for so long.”
Peter
Todd, the solicitor who acted on behalf of the Association of
Personal Injury Lawyers, in the proposed challenge by judicial
review of the Lord Chancellor’s failure to review the discount
rate, today said:
"When the discount rate was first set by the
Lord Chancellor in 2001, using his powers under the Damages Act,
there was a debate as to whether 2.5% was a fair rate to have
adopted. The Lord Chancellor stated that in setting the rate at
that level he expected real investment returns to increase. In fact
the real return of investment on ILGS continued to steadily decline
so that the current gross return before tax is only about 0.7%. The
rate applied can make a huge difference to the amount a Claimant
can receive in damages; it can make a difference of more than a
million pounds in a catastrophic case.
"APIL deserve a great deal of credit for
stepping up and agreeing to challenge by judicial review the
failure to reduce the rate and it is their commitment to this which
has led to today’s decision by the Lord Chancellor to review the
rate. I hope that the rate will be adjusted to a rate which
reflects the real investment return currently available on ILGS,
which will be a substantial reduction of the discount rate. I was
delighted that we could act pro bono in protecting the
interests of those needing to seek damages for injury. I hope this
review is now completed very swiftly so that cases do not
need to be placed on hold for any longer than necessary."