The Discount Rate directly impacts on damages that are paid as a lump sum in personal injury and clinical negligence claims, as it is used to determine the multiplier applied to future loss claims and is supposed to factor in the return on investment that a claimant might achieve if his or her damages were invested in low risk investments.
It is felt by many that the rate has been out of kilter, for some time, with what might actually be achieved and hence there is a risk that claimants will be out of pocket. If the discount rate goes down, damages for future loss will rise and, if it goes up, such damages will decrease.
The Discount Rate was last set by the Lord Chancellor in 2001, when the current rate of 2.5% was applied, and has not been altered since, despite much lobbying by interested parties. A consultation was begun by the Ministry of Justice (MoJ) back in 2012 and it was hoped that a change in the rate would follow.
However, it is now clear that there will be a further delay in the long awaited review of this rate as the Lord Chancellor has decided that, given the complexity of the issues involved, a panel of three experts should be convened to provide advice and assist with the review. The Lord Chancellor has indicated to the Association of Personal Injury Lawyers (APIL) that he anticipates that the panel of experts will report in Spring 2015.
John Spencer, president of APIL, has stated in a recent press release that 'people with life-changing injuries continue to miss out on the right level of compensation to cover their needs while the Government drags its heels on rectifying the problem'.
Alison Appelboam-Meadows, partner in Penningtons Manches' clinical negligence and personal injury team, commented: "We sincerely hope that a decision will be made on this issue soon to remove uncertainty for all concerned."