The Government Increases compensation for accident victims. The government, through the Ministry of Justice has reduced the discount rate used to calculate interest on some aspects of a personal injury claims from 2.5% to – 0.75%. This move by the government will directly increase compensation claims for accident victims.
Suffered a Personal Injury? Government Increases compensation for accident victims
The discount rate is a method used to compensate victims of accidents from inflation eroding their damages. Although the calculations themselves are complex the theory is straightforward.
The discount rate is used to calculate the return an accident victim would receive if he or she were to invest their compensation money in Government Bonds.
Since 2008 Bonds have provided poor returns due to their low interest rates. The new discount rate recognises that it is very difficult to invest compensation for damages and achieve a return which compensates for inflation.
This change will apply to Scotland resulting in a significant uplift in damages payable to victims of accidents for damages such as future loss of earnings. The effect of the change is best explained by example. If a 25-year-old sustained a moderate brain injury and was awarded £100,000 a year for life, under the old system the compensation would be £3.1m. Under the new system, the same person would be awarded £8m.
For more information contact John Carruthers at [email protected]