Compensation to increase for seriously injured clients

The Government has announced that the amounts of compensation awarded to seriously injured people are to be significantly boosted by changing out of date rules on deductions made to compensation by the courts.

Where a court finds that a person has been injured through someone else’s fault, that person will be properly compensated for their injuries and other losses. Where those injuries are life changing, part of the compensation given is for future losses suffered, for example, for lost wages if that person is unable to work or for the cost of future care required as a result of the injury.

A court will order the person or company at fault, or usually their insurer, to pay the injured person a lump sum of money for these future losses. The courts know however that this money can be invested by injured person, leaving them with more money over time if that investment grows, or interest is received on it.

The courts have therefore made deductions to these lump sums of money so that the injured person doesn’t ultimately receive more than they are entitled to. Since 2001 the courts have set the deduction rate at 2.5%, this is called the “discount rate”.

Interest rates available from banks were higher in 2001 however; the base rate at that time was 5%. The current base rate of interest is 0.25% and hasn’t been above 1% for over 7 years. An injured person doesn’t therefore currently have the ability to earn good rates of interest on the lump sum payment they receive for future losses, and were therefore being penalised by the 2.5% discount rate made by courts when calculating their compensation.

The government has now recognised this and has changed the discount rate from 20th March 2017 to -0.75%.

The courts will therefore now add more money onto the compensation the injured party has been awarded given they are unable to invest that money anywhere that will give them a financial return, rather than making a deduction. Seriously injured people will now therefore be awarded much more money up front at the conclusion of the court case.

This will provide far greater benefits to injured people, ensuring they obtain the correct amount of compensation for them and their family after a life changing injury, to secure their future.

The calculations used by the court when applying discount rates are much more complicated than the information contained in this article, but the information above serves as an overview.

If you want to discuss a potential personal injury claim or the issues contained in this article please contact our expert David Wilson on 01226 210000 or via email at