The Personal Injury Discount Rate Explained
The “discount rate” is one of the most consequential numbers in UK personal injury law. It sounds technical — and the underlying maths is — but the effect on injured claimants is direct: it determines how much lump-sum compensation is awarded for future losses. The current rate of +0.5% in England and Wales (in force since 11 January 2025) replaced the previous rate of -0.25%, with substantial impact on the value of high-value claims. This page explains the discount rate twice — first in plain English, then in actuarial detail.
In this guide
- Part 1 — The accessible explanation
- Part 2 — The technical detail
- Frequently asked questions
- Related guides
- Our Partner's Fees Explained
- Check If You Could Claim Compensation For Your Injury
Part 1 — The accessible explanation
What problem does the discount rate solve?
Imagine you’ve been seriously injured and can no longer work. You’ve lost £30,000 a year of income, and you would have worked for another 30 years. Total future loss: £900,000.
But you get the money as a lump sum today, not in instalments over 30 years. If you invest the £900,000, it should produce some return — meaning a smaller lump sum invested today could fund the same 30 years of lost income.
The “discount rate” is the assumed annual return on the lump sum. The higher the rate, the smaller the lump sum needed today to provide the same future income. The lower (or more negative) the rate, the larger the lump sum needed.
A simple worked example
Annual loss: £10,000. Period of loss: 20 years.
- At -0.25% discount rate: lump sum needed ≈ £204,500 (rough).
- At +0.5% discount rate: lump sum needed ≈ £190,000 (rough).
- Difference of about £14,500 — roughly 7% smaller award under the higher rate.
For high-value claims with long future-loss periods, the difference is much bigger. A 40-year future loss period might see a 15-20% reduction in the lump sum at +0.5% vs -0.25%.
Who sets the rate?
The Lord Chancellor sets the rate by statutory instrument, after consulting the Government Actuary and HM Treasury. The rate is reviewed at least every 5 years under the Damages Act 1996 (as amended by the Civil Liability Act 2018).
Current rates (May 2026)
- England and Wales: +0.5% (in force since 11 January 2025).
- Scotland: +0.5% (in force since September 2024).
- Northern Ireland: -0.5% (in force since July 2022).
Why has the rate gone up?
Investment returns and inflation. The discount rate reflects what an injured claimant can realistically earn by investing the lump sum. With higher gilt yields and inflation-protected returns available in 2024-2025, the Lord Chancellor decided +0.5% better reflects current investment conditions than the previous -0.25%.
What does this mean for claimants?
For low-value claims with little future loss, almost nothing. For mid-value claims, modest reductions. For high-value catastrophic claims with 30-50 year loss periods, the rate change has reduced lump sum awards by 10-20%. Critics argue this under-compensates seriously injured claimants; defenders argue it reflects realistic investment expectations.
Part 2 — The technical detail
The legal basis
The discount rate is set under section 2A of the Damages Act 1996 (as amended by section 8 of the Civil Liability Act 2018). The Civil Liability Act 2018 changed the framework substantially:
- The rate must be set by reference to investment returns reasonably expected from a “low risk” notional investment portfolio.
- Previously, the rate was set by reference to Index-Linked Gilts (ILGs) under Wells v Wells [1999] AC 345.
- The 2018 Act broadened the basis to include a diversified low-risk portfolio.
- Reviews must occur at least every 5 years.
- Different rates can be set for different periods of loss (not yet exercised).
The portfolio assumption
The current rate (+0.5%) is based on the Government Actuary’s assessment of returns from a “low risk” portfolio assumed to be:
- A blend of low-risk investments — Index-Linked Gilts, conventional gilts, high-quality corporate bonds, some equity exposure.
- Expected to outperform pure cash but underperform high-risk strategies.
- Assumed to be managed by an experienced investor receiving professional advice.
- Net of management fees and taxation.
Wells v Wells and its legacy
The pre-2018 framework was set by the House of Lords in Wells v Wells [1999] AC 345, which held that the discount rate should be set by reference to Index-Linked Gilts as the safest available investment. This produced rates of:
- 2.5% from 2001 to 2017.
- -0.75% from 20 March 2017 (Chris Grayling’s controversial reduction).
- -0.25% from 5 August 2019 (under the Civil Liability Act 2018 framework).
- +0.5% from 11 January 2025.
The Ogden Tables
Multipliers for converting annual loss to lump sum are taken from the Ogden Tables 8th edition (published 2020). The tables provide:
- Tables 1-26 for life expectancy multipliers (different ages and discount rates).
- Tables 27-34 for fixed-term multipliers.
- Tables A-D for “contingencies other than mortality” — employment risks, education levels, disability adjustments.
- Tables are updated for major changes; the current edition handles +0.5% directly.
Example calculation:
- Claimant aged 35, lost annual earnings £40,000, working to age 65.
- Ogden Table 9 (loss to age 65 for male) at +0.5%: multiplier ~26.5.
- Base future loss: £40,000 × 26.5 = £1,060,000.
- Adjusted for contingencies (Table A — employment factors): typically reduced by 5-15%.
- Adjusted figure: around £900,000-£1,000,000.
Inflation interaction
The discount rate is a “real” rate — net of inflation. Annual losses are typically calculated in present-value terms with inflation expected to be matched by investment returns. This means the discount rate of +0.5% means the lump sum is expected to grow at 0.5% above inflation.
PPO interaction
Structured settlements and Periodical Payment Orders.
Multi-rate scenarios
The Civil Liability Act 2018 allows different discount rates for different periods of loss. So far this has not been used — a single rate applies to all future losses regardless of duration. If implemented, it could mean:
- Short-term losses (0-15 years) at one rate.
- Long-term losses (15+ years) at a different rate.
- Reflecting different investment strategies for different time horizons.
Critics and supporters
The 2025 +0.5% rate has been controversial. Critics — including catastrophic injury claimant solicitors and many medical organisations — argue:
- The rate over-estimates realistic investment returns for risk-averse injured claimants.
- Catastrophic injury awards have been substantially reduced.
- Claimants taking limited investment risk may run out of money.
Defenders — including the insurance industry and government — argue:
- The rate reflects realistic returns available to professional investors.
- Lump sums at the previous -0.25% rate over-compensated relative to actual likely returns.
- The 5-yearly review allows adjustment as conditions change.
Frequently asked questions
Will the discount rate change again?
Yes — the next review must happen within 5 years of January 2025 (i.e. by January 2030). The Lord Chancellor can review earlier if economic conditions change significantly. Direction of change is unpredictable.
Does the discount rate affect general damages?
No — general damages are a single lump-sum award and don’t involve future-loss calculations. The discount rate applies only to future special damages (future earnings, future care, future treatment, future equipment).
My claim was settled at -0.25% rate but my actual losses are higher than expected — can I claim more?
Generally no. Once settled, the case is final. The risk that actual losses differ from projected losses falls on the claimant. PPOs solve this for ongoing losses, but historic lump sum settlements are not reopened.
Is +0.5% the same as inflation?
No — it’s net of inflation. The rate represents real return above inflation. Annual losses are typically projected in present-value terms with inflation handled separately.
Does the rate apply to all UK personal injury claims?
The +0.5% rate applies to claims in England and Wales. Scotland has its own rate (also +0.5% currently). Northern Ireland has its own rate (-0.5% currently). The rates are set independently by each jurisdiction.
How does the rate affect a PPO claim?
It doesn’t directly — PPOs avoid the discount rate by paying annual amounts. The rate is relevant only to lump-sum elements of the settlement (general damages, past losses, immediate special damages).
Will my solicitor explain the rate to me?
They should, particularly for high-value claims where the rate has significant impact. The interaction with PPOs is also important — for some claimants, PPOs may be preferable specifically because of the rate.
Related guides
- Special damages explained
- Structured settlements and Periodical Payment Orders
- Personal injury compensation calculator
- Claiming for someone lacking capacity
- Fatal accident claims explained
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