Decision on discount rate could be further delayed

The Government's release of new research into the setting of a new personal injury discount rate used to calculate lump sum compensation payments could signal a further delay in any decision on the matter.

The warning comes from Kennedys, which has said that the Ministry of Justice's (MoJ's) report on the current use and implications of potential changes to the discount rate actually leaves more questions unanswered for policymakers. 

“The research [highlights] a significant number of evidence gaps, which may lead the MoJ to further delay a decision into the rate," said Kennedys partner Christopher Malla. "Public bodies and insurers are waiting for clarity on this important issue and we continue to urge the government to maintain one discount rate for all heads of loss."

The MoJ's latest examination of the discount rate, following two consultations on the subject in the last 12 months, has looked at the current use and profile of the discount rate, plus how changes in the discount rate affects the size of a claimant’s award and their investment and consumption behaviour.

“The Ministry of Justice is clearly taking the setting of the discount rate very seriously, which is absolutely right bearing in mind it is used to calculate a claimant's future losses in approximately 70,000 cases per year. Whilst the research sample size is small, it reveals that participating claimants invested in a mixed portfolio rather than index-linked government stocks (ILGS), which is something we have long highlighted." said Malla.

Malla also said that it was unfortunate that the research did not go wider to address whether a claimant's damages run out depending on the amount of the discount rate.

Mark Dugdale