23 March, 2022 in Industry News

New Personal Injury Discount Rate for NI

The Government Actuary for Northern Ireland has determined that the new personal injury discount rate should be minus 1.5% as of 22 March 2022.

The first review of the Personal Injury Discount Rate in Northern Ireland has taken place under the new methodology provided for by the Damage (Return on Investment) Act (NI) 2022. The new rate came into effect on 22nd March 2022. The previous discount rate for Northern Ireland was -1.75%, which was set back in May 2021.

The new Act provides for regular reviews of the Personal Injury Discount Rate. The aim of regular reviews of the Personal Injury Discount Rate, at least every five years, is to ensure that the rate is aligned with changing financial conditions. The next planned review will commence in July 2024.

The Personal Injury Discount Rate is a percentage applied to lump sum compensation awards for future care and loss of earnings, paid to a person who has suffered personal injuries. The discount rate is applied to take account of the amount that would be expected to be earned from investing the lump sum. The award as adjusted should put the claimant in the same financial position they would have been in had they not been injured, without under- or over-compensating them.

The new framework for setting the rate reduces the likelihood of over-compensation by better reflecting how claimants are likely to practice investing their lump-sum award. The discount rate remains low as a result of the high expected inflation in the short to medium term, low expected interest rates in the longer term and the anticipated return on bonds and equities remaining low.

Recent uncertainty about the discount rate has caused delays to personal injury claimants receiving their compensation. This legislation will bring that uncertainty to an end and thousands of individuals in Northern Ireland will now benefit from this change.

CavanaghKelly have an experienced Forensic Accounting team on hand and would be happy to assist if you have any queries or issues.

Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.