One partner at a personal injury solicitor firm has recently gone on record by stating his delight that the Coalition government has agreed to a review of the discount rate used to calculate personal injury awards.
Malcolm Underhill, Partner at maximum severity specialist IBB Solicitors, was gladdened by the prospect of the discount rate being adjusted more favorably towards the firm’s clients. IBB Solicitors specialises in spinal and head injury cases that arise from personal injury at work claims and road traffic accident claims.
Very often two of the largest components in substantial personal injury compensation awards for spinal and head injury are those for long term care and lost earnings. The court first makes an assessment of the annual cost or loss in its calculation of the appropriate award. Then the court makes a determination called the “multiplier” of the specific award for lost earnings and care by applying a number of years purchase to the previous figure.
Taken from the Ogden Tables, actuarial tables used in fatal accident and personal injury claim cases, the tables are prepared by a group of actuaries from across multiple disciplines, accountants, insurers, and lawyers.
Taking a number of factors into account, the multiplier usually looks at how long the injured person would have been expected to have worked without suffering the personal injury claim in addition to how long they will most likely require care.
Essentially the number of years the cost of care or loss of earnings will last, the multiplier then faces a subtraction of the current 2.5 per cent discount rate. This discount rate is in existence due to the high probability that the award for the injury will be in one lump sum immediately following either an out of court settlement or the claim’s conclusion at trial. Injured parties often decide to invest lump sum payments in order to profit over and above the current inflation and tax rates, and any profit the injured party would make over tax and inflation is taken into account by the discount rate, which was set by the Lord Chancellor nine years ago.