Reforming the law on setting the personal injury discount rate.
Legislation to create a clearer, fairer and more credible way of setting of the personal injury discount rate for damages claims has been published today.
The personal injury (PI) discount rate is used to help calculate lump sum compensation to cover future losses such as future salary losses or future care costs in personal injury cases.
The Damages Bill, now introduced in the Scottish Parliament, addresses concerns that the current process for setting PI discount rate lacks transparency and has not been reviewed frequently enough – with the most recent change resulting in a substantial shift to the rate.
Subject to Parliament’s approval, the Bill will:
- Put in place a new methodology for calculating the discount rate which should be applied to such losses
- Require the discount rate to be reviewed by the Government Actuary every three years
- Give courts in Scotland the powers to impose periodical payment orders for future financial loss
Minister for Legal Affairs Annabelle Ewing said:
“This legislation is part of our wider programme of civil law reform which aims to ensure the system keeps pace with modern Scotland and the needs of its people. While the number of people affected by the discount rate is relatively small, we know that those cases tend to involve catastrophic injury with little prospect of the individual’s full recovery. That is why it is so important the law determining how the discount rate is set is clear, fair, transparent and credible.”
The Damages (Investment Returns and Periodical Payments) (Scotland) Bill follows a joint consultation by the Scottish Government and UK Government.
A damages award is designed to compensate an injured party fully, neither more nor less, and put them in the position they would have been in but for the injury.
Where damages are awarded for future financial loss in the form of a lump sum, that award is adjusted by means of the personal injury discount rate to reflect the fact that the injured person is able to invest the money before the loss or expense for what it was has actually occurred.
The discount rate is currently set by Scottish Ministers.
The Government Actuary is the head of the Government Actuary’s Department which is a non-ministerial department of the United Kingdom Government responsible for providing specialist actuarial analysis and advice to a wide range of other Government departments and public sector clients.
A periodical payment order is an alternate way of paying damages which spreads the payments over the period which they are intended to cover – usually via an annual payment. Currently, in Scotland, where damages for personal injury are payable, the courts may make a periodical payments order but only where both parties consent. This position differs from that in England and Wales where the courts have the power to impose such an order.
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