What is the Personal Injury Discount Rate (‘PIDR’)?
The PIDR is used when calculating lump sum future losses in Personal Injury and Clinical Negligence claims and is intended to ensure that the claimant receives full compensation. The PIDR takes into consideration that a lump sum award can earn interest, be invested leading to exponential growth over time and reflects the need to offset the effects of inflation, changes in wages, and investment uncertainties.
The change from 11 January 2025
With effect from 11 January 2025, following a review by the expert panel, the Lord Chancellor Shabana Mahmood announced the PIDR has been changed from -0.25% to +0.5%. This decision aims to balance avoiding significant under-compensation, minimising excessive over-compensation, and reflect the expected rate of return on investments for claimants. The review took into account actual investment approaches and returns, expenses of claimants as well as recent changes to taxation regimes.
A link to more information and the outcome of the review can be found below:
Personal Injury Discount Rate - GOV.UK
The PIDR is reviewed every 5 years and an independent expert panel, chaired by the Government Actuary, must be consulted for each review.
What does this mean for the Claimants with future losses?
1. Reduction in Lump Sum Awards:
The increase in the PIDR from -0.25% to +0.5% will unfortunately result in smaller lump sum payments for claimants.
2. Investment Returns:
Although the lump sum awards will be lower, the higher PIDR reflects an anticipated improvement in investment returns. This means that the awarded sum should grow more over time, potentially meeting the claimant's future needs more effectively.
3. Impact on Different Claimant Groups:
Younger claimants with complex and high value personal injury and clinical negligence claims with large future losses and longer periods over which their losses will be realised, will see a more pronounced reduction in their lump sum awards. This is due to the longer investment period assumed in the calculations.
By way of an example, if a young claimant is expected to live for a further 50 years and is assessed as having an annual loss for life of £100,000, the change in the PIDR from -0.25% to +0.5% would result in a reduction in lump sum damages of £901,000.
Table 36 – Multipliers for pecuniary loss for term certain Ogden Table:
Life expectancy = 50 years ; annual loss for life of £100,000
Multiplier at – 0.25% discount rate = 53.26 (=£5,326,000)
Multiplier at +0.50% discount rate = 44.25 (=£4,425,000)
Difference / reduction in lump sum damages = £901,000
Periodical Payments (PPO)
Moving to a positive PIDR would increase the need for the claimants’ legal representatives to consider periodical payments carefully for future recurring losses.
Periodical payments are a method of compensating claimants in complex personal injury or clinical negligence cases, particularly those involving serious or catastrophic injuries. Instead of receiving a single lump sum only, the claimant receives regular, ongoing payments throughout their lifetime.
Such periodical payments are often claimed alongside a lump sum of damages.
Conclusion
The PIDR change to +0.5% will generally result in lower lump sum awards for claimants but is aimed to reflect the improved investment returns.
While this change reduces the immediate lump sum compensation, it emphasises the importance of ensuring that claimants' future needs are met through better investment growth, and to claim for heads of loss by way of periodical payments in large future loss claims.
Disclaimer
This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2025
