What is the Personal Injury Discount Rate (PIDR)?
The PIDR is a mechanism used to calculate how much money an insurer should pay to a injured person who has suffered life changing injuries. It applies to the amount they are compensated for their future financial losses, such as loss of earnings and the cost of care.
The intent behind the PIDR is to ensure compensation reflect these losses with a view to putting a claimant in the position they would have been in but for their injury – no more and no less.
However, considerable sums of compensation are often paid in one big lump sum. The claimant might then invest this, and earn interest. The discount rate therefore reflects the interest that the claimant can expect to generate out of said investments, which the insurer cannot be expected to pay. In other words, the discount rate prevents double recovery of funds.
What is the PIDR now?
The PIDR had previously been set at 0.25%, meaning large sums of compensation can expect to be reduced by this much. The Lord Chancellor has however now increased this percentage to 0.5%, to become effective as of 11 January 2025.
Naturally, this has caused concern for claimant lawyers and organisations, who feel the increase will result in claimants being undercompensated.
Gordon Dalyell, Treasurer for the Association for Personal Injury Lawyers (APIL) stated:
"Even under the current rate of -0.25 per cent, we know that a third of people with life-changing injuries will not meet the costs of their necessary care and support. Any increase in the discount rate makes it more likely that more injured people will be undercompensated. Victims of negligence, who have already been through so much, should not have to face financial pressure to have their basic needs met."
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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.