What next for the Personal Injury Discount Rate (PIDR)?
Will the Next PIDR be a Dual Discount Rate?
In 2019 the then Lord Chancellor set the PIDR at minus 0.25% explaining his reasoning in an accompanying statement. As well as confirming the new PIDR was a risk-based rate the Lord Chancellor confirmed that when setting the PIDR he had regard (as he must) for the actual returns available to investors, the actual investments made by investors of relevant damages and also to make allowances for taxation, inflation and investment management costs.
The Lord Chancellor also confirmed that he had reviewed the possibility of a Dual Discount Rate (DDR) and included the below in his statement
The Government Actuary has also provided an analysis and developed a working model for me to consider prescribing dual rates. This would involve a lower short term rate, a switchover period after a set number of years (15 is suggested) and then moving to a higher long term rate. I found the case for a dual rate an interesting one, with some promising indications, particularly in relation to addressing the position of short term claimants.
We know that the next PIDR has to be set before December 2024 and that the Lord Chancellor must consult the industry and also pull together an expert panel, which the Ministry of Justice have begun to do. Interestingly an invitation to a stakeholder event has recently been sent which includes the following,
Historically, there has been a single discount rate in England and Wales used for all cases, regardless of the size and duration of damages awarded. This is not, though, the only approach and other common law jurisdictions use a dual/multiple rate PIDR which arguably can provide fairer outcomes for more claimants.
A DDR is inherently more complicated than a single rate and it will take time for practitioners on both sides of the field to change from working in a single rate to a dual rate. I don't know whether we will move to a DDR, however if we do, we cant say we weren't warned.