A guide to periodical payments

11 April 2019

The aim of any compensation award is generally to put a person back in the position they would have been in were it not for their accident or injury – so far as that is possible. With any catastrophic injury, such as spinal cord or brain injury, it is important to make sure that the individual has sufficient funds to source the care and support that they will need in the future.

Making sure that there is a provision that an injured client’s needs are met is the first essential consideration. Then the issue becomes one of ensuring that sufficient funds remain available to meet that individual’s needs over the long term, for the rest of their life.

The disadvantages of lump sum awards in serious injury cases

In most successful personal injury compensation claims damages are paid by way of a single lump sum. In the past, that was also true of any award made in a catastrophic injury case. It may seem advantageous to have all the money up front, but lump sum settlements mean that the injured client and their family are then faced with the onerous task of managing and investing that fund so that it lasts.

Even with professional advice, if badly invested or mismanaged, you face the risk of running out of funds to support any care needed in later life. This uncertainty about future income often led to people trying to preserve the fund rather than making the provision they needed here and now.

If their condition deteriorated or the range of care required expanded with age (as is often the case with serious brain injury for example) the concern was that a lump sum might not cover any inflation in future care costs.

Periodical payments

Nowadays, in catastrophic personal injury claims a lump sum payment may not be appropriate, especially in circumstances where there is uncertainty about life expectancy. Instead, the injured individual and their family need to consider all options.  It is important that expert advice is obtained on the advisability or otherwise of a lump sum payment or periodical payments. 

If the parties’ agree and the individual is happy to settle their claim in this way, an application will be made to the Court. After considering the evidence and the parties’ wishes, the Court will make an Order that all or part of the damages – usually the element of care and loss of earnings – is paid in the form of a continuing series of regular annual payments, known as periodical payments, to the injured person for the rest of their life.

Providing certainty for the injured client

Periodical payments are paid by the other party’s insurance company against whom the claim is brought. Periodical payments provide certainty for the future. Your legal team will do the work to identify the level of compensation that will be required to ensure, if appropriate, that the periodical payments adequately meet your needs.

The Court has the power to impose an Order for periodical payments without the consent of the parties if the judge believes that would be in the best interests of the injured person. However, this is very rare in cases where damages awarded are less than £1million.

In most cases, the Court will rule that a lump sum is paid immediately followed by periodical payments on a regular basis. This allows the existing and immediate needs of the injured person (e.g. provision of appropriate accommodation, immediate rehabilitation, aids and equipment etc) to be met without any delay. Thereafter the periodical payment provides the injured person with a predictable regular ‘income’ upon which they can rely for the rest of their life.

Practical and financial advantages of a periodical payment

Periodical payments are usually paid annually. They are index-linked and in most cases the income received will not be taxed. This means that payments will increase according to inflation and so take away the worry of how to accommodate increasing costs of care (e.g. carers’ wages, if they are required). If it is probable that a person’s condition may deteriorate in future, the payments can be ‘staged’ so that they will increase to cover the increasing costs of any additional or more intensive care that may be needed over time.

The amount payable can be varied every year in line with the Retail Prices Index (RPI) and in most cases the Court will also link any payments to the Annual Survey of Hours and Earnings (ASHE). The payments may also change at normal retirement age to reflect the reduced income that would have been received. When the injured party is a young person, the annual sum payable may be increased at a later date to reflect the fact that their parents may no longer be able to provide care and more professional help is needed.

Interim payments

Periodical payments should not be confused with interim payments. Under the Rehabilitation Code, for example, defendants (or more accurately their insurers) are encouraged to immediately pay for therapies, treatments and aids in order to speed recovery. During the course of a claim, an individual may also receive regular interim payments to cover lost earnings and other accident-related expenses. However, where an interim payment has been made, the amount will be deducted from any final award to pay money or damages.

Our specialist solicitors have a wealth of experience in pursuing catastrophic, complex and high value claims such as brain and spinal cord injury compensation claims. We can ensure that you receive the necessary expert advice in handling your claim and managing any compensation you may be awarded.



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 2024

Contact our experts

Sorry, there are a few problems with the information you have entered. Please correct these before continuing.


One moment please...

Thank You

Your submission has been received. We'll be in touch soon.

Who we work with

  • Brain Injury Group
  • Child Brain Injury Trust
  • Headway
  • SIA
  • Back Up
  • Macmillan
  • Danielles Flutterbyes
  • Forces
  • Bens Heroes Trust

Our accreditations

  • Accredited Personal Injury
  • Apil
  • Ama
  • Clinical Negligence
  • Legal 500
  • UK Chambers
  • The Society Of Clinical Injury Lawyers