Brain Injury & The Discount Rate

By the 5th August of this year it is widely expected that the Lord Chancellor will have announced a change in the discount rate; a change that will almost certainly adversely affect people who have suffered catastrophic brain injury as a result of the negligence of others.

The discount rate is used in cases where a person has received a lump sum to cover future losses whether it be earnings, care or treatment. The discount rate is based on the investment return that you would expect from investing in very low risk investments such as the Government Index Linked Securities.

The current discount rate is -0.75% which has been the case since March 2017. Prior to that it had been at 2.5% for over 15 years.

As a simple example of how the discount rate work a 40 year old man who suffered traumatic brain injury and who was earning £25,000 net per year and who would have worked for another 20 years finds he is unable to work again.

Under the current discount rate of -0.75% he would receive £540,000, but under the old rate he would have received £395,000. This difference of £145,000, far from reflecting a windfall for the injured person simply recognises the actual rates of return they will expect to receive on their investments.

The reason for the proposed change is that insurers believe the returns should reflect low risk rather than very low risk investments, but it is deeply unfair for people who receive compensation and who need for a lifetime of care or to compensate them for many years of lost earnings.

Barry Grogan, Personal Injury solicitor at Fosters, said; "In my opinion the likely changes to the discount rate will, if carried out, have a massive impact on claims for people who have suffered the most severe injuries and who need the greatest care."

Unfortunately, the proposed changes which will undoubtedly help the bottom line of insurers will adversely affect not only the severely injured but put further strain on the budget of the health, social and welfare services who will have to stop in to cover the shortfall.

If you have suffered ahead or brain injury, you may have a claim. Please contact one of the Norwich Solicitors from our specialist personal injury team on 01603 620508, or email us for a free no obligation chat.