The Lord Chancellor this morning announced that the Personal Injury Discount Rate for England and Wales will increase from -0.25% +0.5% from 11 January 2025, moving it in line with the prevailing rate in Scotland and Northern Ireland.

The PIDR is used when calculating lump sum future losses and is intended to ensure that a Claimant receives full compensation, reflecting that a lump sum award can earn interest and be invested and hence grow over time but also reflecting the need to offset the effects of inflation, wage costs and invest uncertainties. The Lord Chancellor’s Expert Panel recommended a rate in the range +0.5% to +1.0%; the decision to adopt 0.5% was said to have been taken to reduce the risk of under compensation to claimants.

The change to the PIDR is particularly significant to parties in complex and high value personal injury and clinical negligence cases with large future losses, in which small changes to the discount rate having sizeable impacts upon the value of the claim. By way of very brief example, if a young adult litigant is expected to live for a further 60 years, and is assessed as having an annual loss for life of £100,000, the change in the PIDR from -0.25% to +0.5% is a reduction in damages of £1.289 million

[The multiplier for a term certain of 60 years is 64.74 with -0.25% discount rate, giving a loss of £6.474 million. For the same term certain of 60 years, with +0.5% discount rate the multiplier is 51.85, giving a loss of £5.185 million].

Practitioners will need to carefully review their cases to consider the effect of the PIDR change on any existing Part 36 Offers and take steps to accept or withdraw offers as appropriate. In those cases where judgment is awaited but not delivered prior to 11 January 2025, the new PIDR will apply as an operation of law, and could have disadvantageous cost consequences for claimants arising from Part 36 offers.

The Lord Chancellor elected to retain a single discount rate, rather than a duel or multiple rates by heads of loss; she noted that the additional expense and complication that would be entailed would not outweigh the “limited benefits” that would be gained and that all stakeholders indicated a preference to retain a single rate. A move towards duel or multiple rates, at least in the near future, seem unlikely therefore.