Justice Minister, Naomi Long, has welcomed the review of the personal injury discount rate in Northern Ireland.
The review was carried out by the Government Actuary, who determined that the rate should be –1.5%. The new rate comes into effect on 22 March.
This is the first review completed under the methodology provided for by the Damages (Return on Investment) Act (NI) 2022.
Justice Minister Naomi Long MLA said: “It is important that those members of our society who have sustained serious injuries through no fault of their own are fully compensated for their future financial loss, whilst also ensuring that the way this is calculated is fair to defendants. Having provided for this through the Damages (Return on Investment) Act (Northern Ireland) 2022, I am pleased to see this provision applied, which will end the uncertainty about the rate.
I welcome the Government Actuary’s first review and determination of the personal injury discount rate in Northern Ireland under the new legislative framework.”
The personal injury discount rate is a percentage adjustment to a lump-sum award of damages for future financial loss to a person who has suffered personal injuries. It 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.
The new framework for setting the rate reduces the likelihood of over-compensation by better reflecting how claimants are likely in practice to invest their lump-sum award. The effect of the new methodology is illustrated by comparing the new rate with a hypothetical rate under the previous methodology, which the Government Actuary has calculated would now be –2.25%.
The discount rate remains low as a result of high expected inflation in the short to medium term, low expected interest rates in the longer term and the anticipated returns on bonds and equities remaining low.
Under the new framework, the rate will be reviewed on a regular basis to make sure it reflects any changes in market conditions and the next planned review will commence in July 2024.
Notes to editors:
- The previous discount rate for Northern Ireland, set in May 2021, was –1.75%.
- The Damages (Return on Investment) Act (Northern Ireland) 2022 (“the 2022 Act”), which can be viewed at www.legislation.gov.uk/n.ia/2022/1/enacted, provides a new methodology for setting the personal injury discount rate.
- 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.
- The 2022 Act provides that the task of reviewing and setting the rate falls to the Government Actuary. His report can be viewed at the publication section of .gov website
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