Claims for damages in personal injury cases in England and Wales are subject to the personal injury discount rate (PIDR). This key element for the calculation of compensation in personal injury cases is vital for ensuring fairness when assessing the expected future financial losses.
What is the PIDR?
In serious injury cases, where a claimant is expected to continue suffering losses because of the injury in the future, the PIDR is the percentage adjustment accounting for potential investment growth of the payment in advance of the costs being incurred. The compensation amount is adjusted with the PIDR to cover the needs of the future losses which are expected to be incurred, whilst ensuring that claimants are not overcompensated.
The PIDR is important in calculating the expected future costs which an injured person is likely to incur, whilst maintaining fairness to not overcompensate or undercompensate, a claimant. The rate accounts for safe investments to protect the financial security of the injured party.
How is the PIDR changing in January 2025?
From the 11th of January 2025, the PIDR will change from –0.25% to +0.5%. The PIDR is changing to a positive rate will mean that compensation sums awarded for future loss will be smaller. This is because interest rates are now rising and it is therefore assumed that the investment will now grow over time, rather than decrease in value. The previous negative rate accounted for the assumption that the investment would not grow and therefore it allowed larger sums to be awarded for future loss to ensure that the injured person had sufficient funds to cover inflated costs of care in the future.
The government is required to review the PIDR again by the 11th of January 2029 in accordance with the Civil Liability Act 2018.
The new adjustment reflects an anticipated improvement in investments and market value. It is expected that the settlement amount will increase through investment and so the discount reduces the amount awarded to claimants.
How does the PIDR impact claimants in serious injury cases?
The PIDR directly impacts the amount of compensation which a claimant receives at the time of settlement, based on the current economic market, and so the new positive PIDR will reduce the amount of compensation which is awarded for serious injury cases after the 11th of January 2025. The rate anticipates that investment of the amount will cause the overall sum to increase in order to cover the difference between the cost of the future loss and the amount discounted. However, this may well leave injured people undercompensated if their investments do not grow in accordance with the expected rate. Claimants may see large reductions in the overall value of their claim as a result of the introduction of the new rate. This will be particularly important for claimants who have previously rejected large offers, which now become more reasonable following the change in the discount rate.
The PIDR is essential for calculating fair and reasonable compensation in personal injury cases by aiming to balance the need for financial security, with the prevention of overcompensation for injuries. Claimants can stay updated on PIDR changes through many sources however some common methods used are below:
- Government announcements
- Legal newsletters and websites
- Legal blogs
- Email notifications from government websites
- Professional associations such as the Association of Personal Injury Lawyers (APIL)
Understanding of the PIDR, and the expected investment returns of serious injury compensation lump sums, assists claimants when navigating the complex nature of personal injury compensation awards.
If you have been injured in an accident that was not your fault and would like to speak to a personal injury specialist about a potential claim please call our team on 0161 696 6235.
By Abigail Worden, graduate paralegal
Comments