Just ten days since taking power, the new government today began the formal review of the Personal Injury Discount Rate (PIDR) in England & Wales. The PIDR is a key part of calculating compensation for claimants’ future financial needs and therefore the payments that insurers and compensators will make.
The PIDR has to be set at a level that avoids either over-compensation or under-compensation. Unlike Scotland and Northern Ireland, England & Wales does not have a statutory formula for the PIDR, so the new Lord Chancellor - Shabana Mahmood MP - has to decide on the appropriate level for the PIDR, having taken detailed advice from the Government Actuary’s Department and the Treasury. They have key roles because the PIDR is based on how invested damages would perform, meaning there’s a link here to broader economic indicators.
The review could take up to 180 days - potentially into January 2025 - and during this period a realistic and informed approach to settlement negotiations will be essential. And very close attention will need to be given to the outcome, in early October, of the formula-based PIDR reviews in Scotland and Northern Ireland.
We’ve always had a single PIDR in England & Wales and despite the Ministry of Justice exploring potential dual discount rate models in 2023, our current thinking is that a single PIDR model is likely to be retained. Dual rates could increase complexity, cost and delay, none of which seems to be in the interests of ensuring fair and timely compensation in severe injury claims.
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