What has happened?
Having been at less than 1% for over 13 years and been in a pattern of decreasing for the past 32 years, in the last six months the special investment account has risen not once, not twice, but three times!
On 24 May 2022 the government announced that the Lord Chancellor had decided to increase the special investment account rate from 0.1% to 0.645% from 29 April 2022.
Then on 22 September 2022 the government announced that the special investment account interest rate would rise to 1.75% from 2 September 2022.
Curiously, the announcement indicated that there had been an intermediate increase to 1.25% at some point because it said that the rate "increases from 1.25% to 1.75%". I cannot yet trace any announcement of when this happened.
What does this mean for my clients?
Because these interest rate changes only apply from the date they came into effect, personal injury claimants will not see an overnight jump in the interest awards on their special damages. However, it could have a significant effect long term.
For example, interest on an award of £30,000 for past loss of earnings (which loss has been ongoing for a period of three years between the start of the loss and trial so interest would be awarded at half the special account rate), is £787.50 if the interest rate is 1.75% for that whole period instead of £45 if the interest rate was 0.1%.
What does this mean for me?
For many practitioners, historically low rates of interest is all that they have known and the effort of carrying out interest calculations is poorly rewarded by a very small sum. This flurry of interest rate increases means two things:
- A return to more complicated interest rate calculations in schedules and at the end of trials as interest is calculated at half or full the special account rate as it has varied over the period.
- Interest calculators such as those on Westlaw will become invaluable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.