The new Personal Injury Discount Rate is now in effect
The Personal Injury Discount Rate, which applies to compensation paid upfront for future losses in clinical negligence claims in England, has been revised and the new rate of 0.5% applies to all claims settled on or after 11 January 2025.
What is the Personal Injury Discount Rate (“PIDR”)?
In claims where clinical negligence is proven, claimants are entitled to recover compensation for, and associated with, their injuries. This compensation will include money for the injury that has been sustained, but may also include compensation for past and future financial losses that the claimant has suffered as a result. It may be, for example, that a claimant is no longer able to work as a result of their injuries and so they are losing out on earnings, or it may be that a claimant will require additional therapies or care at some point in the future.
The overarching principle and purpose of compensation in claims such as these is to put the claimant back in same the position that they would have been in, had the defendant’s negligence never occurred. But how do you do this when the value of money changes over time, or where money is invested, as is so often the case? Depending on the economic climate of the country, claimants could end up significantly out of pocket or, conversely, much better off, financially, than they otherwise would have been, and neither of these eventualities are permissible under law.
In order to try and mitigate against this, the PIDR is applied to future losses which are to be paid upfront to a claimant on the conclusion of their case.
The PIDR relates to the projected rate of return on money invested, which in this case relates to claimants’ compensation for future losses. A higher PIDR suggests that financial investments are projected to do well over the next coming years, and a lower PIDR suggests that a lower rate of return is envisaged. The accuracy of the PIDR depends on how the economy fares generally, and for this reason, the PIDR has to be reviewed, by law, every 5 years.
The new PIDR
In December 2024, it was announced that following the Lord Chancellor’s 2024 PIDR Review, the PIDR would be amended to 0.5% and that this change, an increase from the old rate of -0.25%, would be effective from 11 January 2025.
This means that claimants will now receive less money upfront for their future losses than under the old rate, as it is anticipated that, with investment, this money will increase in value over time and at a better rate than previously, so that by the time that the money is required, it will be sufficient to meet that particular claimant’s needs.
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Emma Lambourne is a senior solicitor in our clinical negligence team. If you have any questions or concerns about the topics covered in this article and would like to speak to the team, please get in touch.