Personal injury discount rate set to change

Date published: 26 March 2021

The Department of Justice has indicated that it intends to change the personal injury discount rate.

picture of naomi long

Secondary legislation will be laid before the Assembly to change the current rate from 2.5% to a new rate of minus 1.75% from May 31.

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. 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.

Separately, the Damages (Return on Investment) Bill, which was introduced to the Assembly on 1 March, and is now in Committee Stage, intends to change the way the discount rate is set. The rate will be reviewed again once this legislation has been enacted, which is expected to be early next year.

Justice Minister Naomi Long said: “I had hoped that legislation under the Damages Bill could be enacted by summer 2021 and a rate set under the new framework by autumn 2021. To that end I sought to bring accelerated passage of that Bill through the Assembly. However, an expeditious passage of the Bill through the Assembly has not proved possible.

“In view of this significant change in the expected time scale, the Department has reviewed its previous decision not to change the rate and, after careful consideration, decided to change it to minus 1.75% consistent with the current legal framework.”

Notes to editors: 

  1. 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.
     
  2. The discount rate in Northern Ireland is currently 2.5% and was set in 2001. At present, the rate has to be set under principles established in the case of Wells v Wells, with reference to returns on “very low-risk” investments.
     
  3. The new framework for setting the rate under the Damages Bill would require it to be set based on returns from a portfolio of cautious investments.
     
  4. The decision to introduce a new rate on 31 May was taken by the Department of Justice Permanent Secretary following the delegation of key policy decisions in relation to the personal injury discount rate to him by Justice Minister, Naomi Long in view of a declared conflict of interest.
  5. Media enquiries should be directed to the Department of Justice Press Office via email to press.office@justice-ni.gov.uk
     
  6. 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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