Shedding Light on the New Discount Rate

A Summary of the Discount Rate Repercussions Talk, Discussion and Q&A with Andrew Axon of Park Lane Plowdon and Jennifer Stone of Nestor.

The Lord Chancellor’s announcement of a new discount rate of -0.75% on 27 February 2017 sent shockwaves through the personal injury community.

To address some of the issues raised, Nestor director Jennifer Stone joined with leading clinical negligence barrister, Andrew Axon of Parklane Plowden Chambers, to host an information evening. The event took place at the Doubletree Hilton Hotel in Leeds, and guests were given the opportunity to ask Jennifer and Andrew questions. Attendees included representatives from the University of Law, financial planners and national and international law firms, representing both claimants and defendants.

The drop in the discount rate used by Courts in England and Wales to calculate personal injury damages awards from 2.5% to -0.75% has implications for Professional Deputies and insurers alike.

Jennifer explained why personal injury clients are affected in a different way to other investors: “Ordinary investors can ride out fluctuations in the market, but these claimants can’t. They can’t earn more and they need to use it, year-on-year, to pay for their care and equipment and so on.”

Jennifer and Andrew discussed a wide range of potential repercussions of the new rate, including:-

  • whether using Index Linked Government Stocks (ILGS) is still a relevant way of calculating the discount rate;
  • the history which has created the current situation and what this can tell us about the future;
  • some real world examples of how the new rate will affect claimants;
  • the pros and cons of lump sums and periodical payments orders (PPOs);
  • the importance of interim payments; and
  • the effect that the rise in house prices has had on the Roberts v Johnstone calculation used for funding accommodation.

During the course of the discussion, Jennifer explained the value that Nestor can bring to people affected by the new rate. “We have spoken to several Professional Deputies since the announcement on 27 February and they are worried about managing clients and their expectations – and rightly so. We’re not just number crunchers, we have a lot of experience of dealing with families post-settlement and their Professional Deputies, when a Deputy is warranted. We’re planning for human beings.”

To see the discussion in full, click here, or you can see the presentation slides here.