Countdown to New Personal Injury Discount Rate Begins

As discussed in the preceding article, the Civil Liability Act received Royal Assent on 20 November 2018. Pursuant to Part 2 of the Act,[i] the current Lord Chancellor and Secretary of State for Justice, The Rt Hon David Gauke MP, has 90 days from this date to provide the first review of the rate of return, which currently stands at (-)0.75%.[ii]


Once the first review has been published, the Lord Chancellor then has 140 days to determine an altered rate.


Hypothetically, if the time limit for both ‘review commencement’ and ‘rate determination’ are exhausted, the latest date for setting the rate is 7 August 2019.

In a previous edition of BC Disease News (here), we discussed that the former Lord Chancellor, David Lidington MP, had expected the revised rate to lie somewhere between 0% and 1%.  It is foreseeable that such a prediction might materialise, as assumptions on investment risk have changed. Where the current rate presumes that claimants invest their damages at ‘very low risk’, the latest piece of legislation is less cautious.


This will please the insurance industry, which has warned the Government about the risk of over-compensating claimants since the rate was drastically reduced from 2.5%, in February 2017, by Elizabeth Truss MP.

‘Compensators will ... be able to plan their reserves in a more realistic manner’.[iii]

On 6 December 2018, the Ministry of Justice (MoJ) issued a call for evidence, which closes on 30 January 2019.[iv] In his foreword to the public call, the Lord Chancellor described the task of setting a ‘fair’ and ‘accurate’ rate as a ‘demanding and technical exercise’. Urging ‘everyone who can provide evidence to do so’, the Government anticipates industry responses which will offer ‘relevant data and information’ on:

  • Investments available to claimants;
  • Investments actually made by claimants;
  • Investment advice provided,
  • Taxation;
  • Inflation;
  • Investment management costs and ‘the extent to which claimants can properly reduce their exposure to [them];
  • Model investment portfolios; and
  • Other considerations, e.g. examples of investments made by investors ‘with a similar risk appetite’ to personal injury claimant investors.[v]

Elsewhere, the Scottish Parliament’s Economy, Energy and Fair Work Committee has published a report in response to the Damages (Investment Returns and Periodical Payments) (Scotland) Bill. A spokesperson for the Scottish Government has declared that the draft law proposes a ‘fairer, clearer and more credible’ approach for calculating the Scottish personal injury discount rate.[vi] The Committee report agreed, affirming that:

‘The Committee welcomes the introduction of this legislation and are content it will in principle achieve fairness and transparency across a range of cases and for both sides’. [vii]

In edition 254 (here), we reported that the States of Jersey would attempt to follow the Scottish Bill, by conferring power to the courts to impose a periodical payment order, as an appropriate alternative to a lump sum award, without the consent of parties.

In the report, convener of the Holyrood Committee, Gordon Lindhurst, praised the flexibility of instalment-based compensation, but questioned ‘how ... [the Scottish Government] ... will promote the use of these periodical payment orders’.

Furthermore, the report seeks additional information as to how the 30-year assumed investment period would be analysed and proposes that subsequent rate reviews should be undertaken by the Government Actuary every 5 years rather than every 3 years. If accepted, this would mirror the process set out in the Civil Liability Act.


[i] Civil Liability Act 2018, pt 2 <> accessed 3 January 2018.

[ii] ‘Government sets clock ticking on discount rate reform’ (21 December 2018 Litigation Futures) <> accessed 3 January 2019.

[iii] Ibid.

[iv] John Hyde, ‘MoJ plans for discount rate change with call for evidence’ (7 December 2018 Law Gazette) <> accessed 7 January 2019.

[v] Nick Hilborne, ‘MoJ calls for evidence on new personal injury discount rate’ (Litigation Futures 10 December 2018) <> accessed 7 January 2019.

[vi] ‘New personal injury compensation law will deliver “fairness and transparency”’ (3 December 2018 Swindon Advertiser) <> accessed 3 January 2019.