A change to the way compensation payments are calculated for people who have suffered very serious injury was announced some weeks back in England and Wales.
The UK Ministry of Justice announced it will cut the discount rate – a calculation used to determine lump sum compensation to claimants who have suffered life-changing injuries – to -0.75 per cent from 2.5 per cent.
In the calculation, an assumption is made about the interest rate the recipient would get through investing the money. The higher the rate – known as the discount rate – the lower the lump sum required at the outset. As the rate has been a lot higher than current interest rates, accident victims are being significantly under-compensated.
English Law Society president Robert Bourns said: “The government consulted on a review of the rate four years ago but a decision never followed, so reform is long overdue. The rate has been set at 2.5 per cent since 2001, despite the decline in interest rates since the 2008 financial crisis.
“This reduction in the rate means lump sum damages payments will increase, and will result in a better deal for those who have been very seriously injured with consequences that are long term – for example, babies who have suffered brain damage at birth and require compensation to cover the support and adaptations they need to help them live as normal a life as possible.
“We welcome the fact this will result in fairer compensation for those who’ve been seriously injured and we now await the consultation.”
Changes to the rate, which affects the calculation of compensation awards for serious personal injuries, will come in on 20 March, 2017. That’s some good news for those involved in very serious accidents.