Personal Injury Discount Rate: Scotland & Northern Ireland set new +0.5% rate

Previously the rate in Scotland was -0.75%; and in Northern Ireland -1.5%.

The upwards revision will be very encouraging for insurers and indemnifiers in England and Wales, notwithstanding both Scotland and Northern Ireland calculate their respective PIDR using different methodology from that which has previously been observed for England and Wales (Schedule B1 and C1 of The Damages Act 1996).

There is no assurance that the Lord Chancellor, advised by the government actuary, will adopt a similar rate in England and Wales, but in light of a similar move to a positive rate in the Isle of Man in November 2023 (from -0.25% to +1%) and the update coming from Scotland and Northern Ireland, it is becoming increasingly likely that a move from -0.25% to a positive discount rate in England and Wales is imminent.

Encouragingly for compensators in England and Wales, whilst the new positive Scottish rate also took into account an increased allowance for tax and investment costs of 1.25% (previously 0.75%), this did not preclude an overall positive rate. Accordingly, compensators in England and Wales can take comfort that any such increase in the applicable tax and investment deductions (currently 0.75%) will not preclude a more favourable outcome for them.  

Interestingly, both the Scottish and Northern Ireland model applied average weekly earnings (AWE) rather than Retail Price Index which, it is suggested, provides a better indication of inflation in relation to earnings and care costs.

Both Scotland and Northern Ireland previously adopted a 43 year investment term, finding alignment with the England and Wales model.

Finally, the rate that has been set is a single rate and likely reflects the lukewarm reception mixed, dual, or multiple rates received in the government’s recent Call for Evidence.

The Lord Chancellor, Shabana Mahmood, must conclude her review of the rate applicable for  England and Wales by 11 January 2025.