Bridge McFarlandLLP

Personal
Legal Services
More Information
Bridge McFarland LLP can offer you practical, uncomplicated advice, support & guidance when you need it most. Whether it be an employment dispute, family advice, an accident or negligence, life planning or moving house, let us help you.
Business
Legal Services
More Information
Our commercial team in Lincoln, Hull, Market Rasen and Grimsby prides itself on its sound business sense, commercial insight, local knowledge and first class understanding of the relevant legal disciplines ranging from employment law, business contracts, dispute resolution to agriculture and property development. From company formation to sale, succession, dissolution or dispute resolution, you can trust our team to deliver first class service and results.
Photograph of Chris Gresswell-Green
Chris Gresswell-Green
Senior Solicitor
View Profile
Photograph of Janet Wilson
Janet Wilson
Senior Conveyancing Executive
View Profile
Photograph of Rob Ripley
Rob Ripley
Partner
View Profile
Photograph of Lee Whiting
Lee Whiting
Partner
View Profile
Photograph of Lisa Moore
Lisa Moore
Partner
View Profile
Photograph of Ian Sprakes
Ian Sprakes
Partner
View Profile
Photograph of Leanne Keating
Leanne Keating
Partner
View Profile
Photograph of Rob Ripley
Rob Ripley
Partner
View Profile
Photograph of Mike Wilson
Mike Wilson
Partner
View Profile
Photograph of Chris Hubbard
Chris Hubbard
Partner
View Profile
Photograph of Jacqui Johnson
Jacqui Johnson
Partner
View Profile
Home » Latest News » Government’s Announcement of New Personal Injury Discount Rate – Bridge McFarland LLP’s Response

Government’s Announcement of New Personal Injury Discount Rate – Bridge McFarland LLP’s Response

Government’s Announcement of New Personal Injury Discount Rate – Bridge McFarland LLP’s Response

A lower discount rate favours the claimant and a higher one, the defendant (or, the defendant’s insurers, who will be paying the compensation).

On Monday the 15th July, the Lord Chancellor and Justice Secretary, David Gaulke announced a change to the discount rate that applies when someone receives compensation. The rate has been held at minus 0.75% since the government changed it from 2.5% in February 2017. The recent announcement of the new rate has been made after an extensive review of the rate and which was undertaken as a result of the government’s Civil Liability Bill 2018. The new rate will come into force on the 5th August 2019.

What is the Discount Rate and what is the effect of this latest announcement?

The idea of personal injury compensation is to put the injured person back into the position they would have been in, had the accident causing the injury, not occurred. In some serious injury and medical negligence cases, injured claimants may be awarded compensation (damages) for future losses, such as future loss of earnings, future care needs and the cost of any future medical treatment. If a claimant has suffered major life changing injuries, these future losses can be of a substantial amount. Before an award is finalised, the solicitors for the claimant and for the defendant apply the relevant discount rate to the award, to take into account interest and inflation.

A lower discount rate favours the claimant and a higher one, the defendant (or, the defendant’s insurers, who will be paying the compensation).

The discount rate is intended to be set at a rate that is roughly equal to that which a claimant could expect to receive by making a fairly low risk investment of the lump sum he receives.

How has the announcement of the new minus 0.25 percent been received?

Although increasing the rate from minus 0.75 percent to minus 0.25 percent is going to mean that claimants will have a larger amount deducted from the lump sum they will receive for future losses, generally, solicitors who regularly act for claimants, have welcomed the new rate. This is because it was widely expected that government would increase the rate by anything between 0 and 1 percent.

For the same reason, the insurance companies on the defendant side, have reacted with outrage, because they were confident that the rate would increase by considerably more. This is notwithstanding the fact that with the increase that the government have announced, the insurers are reportedly likely to profit by as much as £320 million a year.

Bridge McFarland LLP’s view

Bridge McFarland LLP’s Personal Injury and Industrial Disease Partner, James Burrell has cautiously welcomed the announcement. On hearing news of the new rate, James said;

“In as much as it was widely expected that the discount rate could be increased to as much as 1%, then the new rate of minus 0.25 percent is to be welcomed. However, what has to be remembered is that those claimants for whom the discount rate is important, have, in the majority of cases, suffered serious, life changing injuries.

"The simple fact remains that this change means that claimants settling claims which include future losses, after 5th August, will now see a larger sum deducted from their compensation award, than has previously been the case. Whether they are able to make up the difference by investment is a moot point.

"One thing that the announcement will do is end the uncertainty and difficulties that both claimant and defendant lawyers have faced in trying to settle cases. We have for what has seemed an eternity, known that the discount range was going to change but not whether it would be in the claimant or the defendant’s favour, or by how much it would change in any event. Both sides have felt that they were trying to negotiate settlements with one hand tied behind their back. This will bring clarity and that can only be good for claimants and should ensure that some cases are capable of quicker settlements than has been the case for some time.”