Lawyers respond to ‘seismic shift’ in personal injury discount rate

Lawyers have responded to the Scottish ministers’ decision to lower the discount rate for personal injury awards in Scotland from 2.5 per cent to minus 0.75 per cent, reflecting the same change south of the border, as announced last month by the Lord Chancellor.

Scottish ministers announced that they had made an order to set the new rate, which will come into effect today.

Doug Keir, partner in the insurance team at Weightmans, said: “This decision will drastically increase the size of lump-sum payments across the scale of serious personal injury cases in Scotland.”

He added: “Each individual case will be affected differently by this change. However, taking the example of a £9m case, of which £8.2m relates to future losses and expenses, the new discount rate of -0.75% would more than double the value of the claim to a cost of just over £20m.

“It’s disappointing that this radical change has been made in the absence of any meaningful studies into how damages are typically invested and the rates of return they can expect to receive.

“The rate of 2.5 per cent, set in 2001, was based on returns generated by index-linked government stocks, but in reality that is not how the vast majority of claimants choose to invest the damages they are awarded – and that needs to be understood if we are to identify a fair rate.

“This decision neglects to address the question of whether the way in which the discount rate is calculated is still fit for purpose and relevant.”

The Vice-Dean of Faculty, Angela Grahame QC said: “The Lord Chancellor’s announcement about the change in the discount rate was dramatic and unexpected, but it is no surprise that Scottish ministers have decided that here in Scotland, too, the new rate will apply.

“The change will have a significant impact on all practitioners who work in the field of personal injury. Schedules of Damages and advice on values of claims from both sides of the fence could be radically revised in light of this. The Faculty’s Training Committee is discussing an event to consider the implications of this seismic shift.“