PIDR: Protecting clients, no matter the outcome

In our last legal and regulatory update, Stuart Hanley shared that we were still awaiting the Government’s final consultation of the Personal Injury Discount Rate (PIDR), which is expected to conclude by 11 January 2025.

The review of the Personal Injury Discount Rate (PIDR) is crucial for how compensation is calculated in personal injury and clinical negligence cases. The PIDR helps ensure that claimants who receive lump sum payments for future financial losses (like care costs or loss of earnings) are fairly compensated, considering potential investment returns on those sums, future inflation, and taxes. A lower PIDR means a higher lump sum, benefiting claimants.

The 2019 adjustment set the PIDR at -0.25%, ensuring claimants are fully compensated, but under the Civil Liability Act 2018, this rate must be reviewed every five years, with the next adjustment expected in January 2025. Depending on the outcome, seriously injured individuals could see changes in their compensation calculations, particularly regarding how their settlements are structured to account for future needs. Both Northern Ireland and Scotland have increased their PIDR rates to +0.5%, suggesting that England and Wales may follow suit, and would mean a reduced compensation sum.

But regardless of the outcome, how can we still protect clients?

In response to these developments, Minster Law is proactively developing strategies to advise clients and ensure they continue to receive the compensation they both need and deserve.

It may be that Periodical Payment Orders (PPOs), which provide regular annual payments instead of a lump sum become a far more better option for some claimants. This approach offers financial stability, ensuring that claimants have guaranteed payments for the rest of their lives, which can help cover significant ongoing future costs. Periodical payments can be index linked which means they can move up and down with inflation. Since the decision in Thompstone v Tameside & Glossop Acute Services NHS Trust [2008], the court can use the Annual Survey of Hours and Earnings Index (ASHE) to link to the PPO if the injured person is receiving on-going care. While PPOs offer long-term financial security, they also come with certain drawbacks, like the loss of flexibility to invest or a clean financial break from the defendant.

Given the upcoming outcome of the review, claimants with ongoing claims who may have previously discounted PPOs may want to re-consider to secure a reliable income stream for critical expenses like care and equipment. Minster Law will be keeping a close eye on the developments around this to advise clients fully on this going forward.