By way of recap those affected by the discount rate will remember that in February 2017 the Lord Chancellor (Liz Truss) issued a statement that, as of 20 March 2017, the discount rate would change from 2.5% to minus 0.75%. In March 2017 the Scottish Ministers made an order confirming that Scotland would adopt this new discount rate with the change coming into effective from 28 March 2017.
Then in July this year, the Lord Chancellor (David Gauke) announced a change for England and Wales setting the Discount Rate at minus 0.25%. However, Scotland did not make an announcement on whether the rate would change in Scotland, until now…
Part of the Damages (Investments Returns and Periodical Payments) (Scotland) Act 2019 came into force on 1 July 2019. The sections already in force set out timescales for review of the discount rate for Scotland every 5 years. We advised in July that the first review was already underway.
The Government Actuary has now published his determination of the Personal Injury Discount Rate in Scotland, following completion of his review. The report concludes the discount rate in Scotland should remain unchanged, at minus 0.75%.
This disparity will no doubt lead to much debate. The purpose of the discount rate is to adjust the figure awarded to the injured person to reflect the interest and return they can expect to earn by investing and managing the compensation. The different rate in Scotland takes into account a more risk averse investment approach in Scotland as well as a shorter investment period.
The intention is to put the claimant in the financial position they would have been in had they not been injured. The discount rate is therefore hugely important to claimants, insurers and compensators. A small change in the rate can make an enormous difference to the compensation ultimately agreed between parties, or awarded by the courts. For claimants, there may be a sense of relief that having championed a change for so long to see that change has not been reduced, in Scotland at least. However, for insurers and compensators,[delete this comma] there is likely to be disappointment with many expecting a reduction in the rate. Questions arising from the announcement include whether there will now be attempts at forum shopping.