The Lord Chancellor has this week announced the long-awaited revision of the Discount Rate in England and Wales. The Discount Rate, which is used to adjust high value personal injury lump sum awards to account for the expected rate of return upon investment of the compensation, will increase from -0.75% to -0.25% with effect from 5 August 2019.
The increase follows concerns that the rate of -0.75%, which was reduced from +2.5% in 2017, was resulting in claimants being over-compensated and was increasing the financial pressure on public bodies and insurance companies which have large personal injury liabilities. Whilst the new rate will effectively reduce compensation paid out by insurers, the increase is not to the level which had been anticipated by the insurance market of between 0% and +1% and concerns remain regarding the knock-on effects to insurance customers and tax-payers. The new rate will be reviewed within five years by an independent expert panel
Despite the 2017 change in England and Wales, no change was made to the discount rate in so far as it applied to Isle of Man cases. By the Damages (Personal Injury) Order 2014 (made under section 24(1) of the Law Reform Act 1997) Tynwald approved the Treasury set rate of +2.5% to be applicable to the Isle of Man. The decision in De Yoxall v Moore* confirmed that this rate would be upheld by the Courts and only departed from in exceptional cases where the specific facts of the case meant that a different rate would be more appropriate.
In 2017, the Isle of Man Minister for the Treasury announced that the discount rate in the Isle of Man would be kept under review but confirmed that no change would be made until the results of the UK review were available and had been considered.
The discount rate in the Isle of Man therefore currently remains at +2.5% until such time it is amended by the Treasury and approved by Tynwald. Whilst it is anticipated that changes similar to those proposed for the UK will be implemented in the Isle of Man, there remains no indication as to when this may be.
* De Yoxall v Moore [4 August 2015] ORD 2009/17 (Unreported)
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