The Personal Injury Discount Rate (PIDR) has been undergoing significant reviews across the UK, with recent changes introduced in both Scotland and Northern Ireland. Following the Ministry of Justice’s review of the discount rate in England and Wales earlier this year, a similar consultation has been ongoing in Scotland and Northern Ireland since June 2023.
What is the Personal Injury Discount Rate (PIDR)?
The PIDR is a crucial tool in personal injury claims, particularly when dealing with serious injuries. It is a percentage rate used to calculate how much compensation a liable party must pay a victim in lump sum settlements. The rate is designed to ensure that personal injury victims receive adequate compensation, taking into account their future financial needs. This discount rate helps to estimate the expected return on investments that the injured party might make when receiving a lump sum, ensuring the compensation remains sufficient throughout the duration of the claimant’s life.
New PIDR for Scotland and Northern Ireland
As of September 2024, the Government Actuary’s Department introduced new discount rates for Scotland and Northern Ireland:
- Scotland: From -0.75% to +0.5%
- Northern Ireland: From -1.5% to +0.5%
These new rates are immediately in effect and represent a significant shift from previous figures. In Northern Ireland, the previous rate had been set at +2.5% for almost twenty years before it was lowered to -1.5% in 2022. Meanwhile, Scotland has maintained a PIDR of -0.75% for the past five years.
Reasons for the Changes
The changes in discount rates are driven largely by the anticipated improvement in returns on a notional portfolio of investments. According to the Department of Justice, economic improvements over the past two years have led to more optimistic forecasts for financial investments. As a result, claimants may expect better returns on their investment portfolios, meaning that the compensation they receive will stretch further to meet their long-term needs.
Future Outlook
The next review of the PIDR in Scotland and Northern Ireland is scheduled for five years from now, offering some stability in the rates until that time. However, both claimants and defendants in these regions are also awaiting the outcome of the ongoing PIDR review in England and Wales. The result of that review is expected in January 2025 and could bring additional changes to the way compensation is calculated across the UK.
Conclusion
With these recent adjustments, claimants in Scotland and Northern Ireland should see more favourable financial outcomes in their settlements. As the economic environment continues to evolve, the PIDR will remain a key mechanism for ensuring that victims of personal injury are adequately compensated for their future needs.
Nick Lavelle
Managing Director, Coris UK
Head of International Claims, CCN Group