The last revision of the discount rate was undertaken on 25th June 2001, when it was set at 2.5%. From 20th March 2017, the rate drops from 2.5% to minus 0.75%. It is a change of 3.25 percentage points.
What does this mean?
The discount rate is applied to cases where a sum is paid to compensate for futures losses, the discount rate is applied to account for the facility for the claimant to invest the funds received and to accord for interest received on the sums. This is sometimes referred to accelerated receipt. The financial landscape has changed significantly since 2001, and the change in the discount rate reflects the uncertainty of investments returning a positive yield. Therefore the changes now provide for a negative discount, i.e. 0.75% increase upon the multiplied sums.
So how does this work?
For instance, if a claimant seeks compensation for future care costs for say 35 yeas; costing £95,000 per annum, under the old discount the sum would be as follows:
23.43 x £95,000 = £2,225,850
Under the new rate of -0.75:
40.105 x £95,000 = £3,809,975
This illustration indicates how dramatic the new rate change will be and how it makes a significant difference to the Personal Injury Claim. If you are concerned that your solicitor settled a case in the last 6 months without having regard to these changes or feel that your current representation is not giving you accurate advice regarding the changes in the discount rates then please feel free to discuss matters with one of our dedicated legal specialists on 020 7822 4000 / 01273 685 888 or email email@example.com.