Discount Rates

Posted:27th March 2017

After the shock wave following the significant reduction in the discount rate begins to pass through the personal injury industry, we start to absorb what this means for claims if the new discount rate remains in force.  The costs of deputyship and trusteeship are commonly claimed as part of the lump sum of damages rather than being encompassed in a periodical payments order (PPO).  If they do form part of a PPO, this is sometimes because of a concern that the client will recover capacity, and therefore the payment of that part of the Order is linked to the ongoing appointment of a deputy.  However, we now foresee a greater role for wrapping deputyship costs up within a PPO, which is to avoid the impact that the new discount rate will have on the lump sum required to provide for the costs of deputyship over a client’s lifetime.  Previously we have seen this element of a claim form a lump sum requirement of £500,000 or even £750,000 – now that figure can be expected to rise to or exceed £1m.  As defendants seek to minimise their exposure to significant lump sum payments, we expect to see a shift towards encompassing provision for deputyship costs within a PPO.  If defendants are achieving that, might they not also seek to remove that element of the payment if the deputy is discharged?  It would not be a significant stretch to do so.

The reduction in the discount rate will have significant effect in all areas of making a claim – none more so than the deputyship and trust arena which, we believe, is ripe for change.