Long introduces legislation to change how the personal injury discount rate is set

Date published: 01 March 2021

Justice Minister Naomi Long MLA today introduced legislation to change how the personal injury discount rate is calculated.

Picture of Justice Minister Naomi Long

The personal injury discount rate is a percentage applied to a lump-sum award for future financial loss, such as loss of earnings and cost of care, paid to a person who has suffered personal injuries. The Damages (Return on Investment) Bill will change how the rate is set.

The discount rate is applied to take account of the amount that would be expected to be earned from investing the lump sum. The award as adjusted should put the claimant in the same financial position they would have been in had they not been injured, without under- or over-compensating them.

Speaking after introduction of the Bill to the Assembly, Naomi Long said: “It is important that we change how the discount rate is calculated so that it is fairer to all parties involved in personal injury litigation, whilst ensuring that claimants who have suffered serious personal injuries are fully compensated.”

“I am aware that the recent uncertainty about the discount rate has caused delays to personal injury claimants receiving their compensation. This legislation will bring that uncertainty to an end.”

The Bill has three main aims:

  • to introduce a new statutory methodology for calculating the discount rate that will better reflect how a claimant would be advised to invest their award;
  • to ensure that the rate is regularly reviewed, at least every five years; and
  • to transfer responsibility for setting the rate from the Department of Justice to the Government Actuary. 
     
    The Bill will require the Government Actuary to review the discount rate under the new legislation as soon as it comes into operation and to complete his review within 90 days.

Notes to editors: 

  1. The Damages (Return on Investment) Bill was introduced to the Assembly on Monday 1 March.
     
  2. It is a well-established principle of law that individuals should receive full compensation – but no more and no less - for losses suffered as a result of personal injuries that are not their fault. The personal injury discount rate is a percentage used to adjust lump-sum awards of compensation for future financial losses (such as loss of earnings) and costs (such as care costs) to account for the amount a claimant can expect to earn by investing their award.
     
  3. The discount rate in Northern Ireland is currently 2.5% and was set in 2001. At present, the rate has to be set with reference to returns on “very low-risk” investments. However, there are concerns that this approach results in overcompensation due to evidence that, in practice, claimants make “low-risk” investments. The discount rates in the rest of the UK are now set on that basis.
     
  4. Media enquiries should be directed to the Department of Justice Press Office via email to press.office@justice-ni.gov.uk.
     
  5. The Executive Information Service operates an out of hours service for media enquiries between 1800hrs and 0800hrs Monday to Friday and at weekends and public holidays. The duty press officer can be contacted out of hours on 028 9037 8110.

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