Structured Settlements And Periodical Payment Orders (Ppos)

For very high-value personal injury claims involving lifetime care or earnings loss, a “Periodical Payment Order” (PPO) can be an alternative — or supplement — to a traditional lump sum award. PPOs provide annual inflation-linked payments for life, transferring the investment and longevity risk from the claimant to the defendant’s insurer. Introduced in their modern form by section 2 of the Damages Act 1996 (as amended by the Courts Act 2003), PPOs have become standard in catastrophic injury claims. This page explains how PPOs work in 2026, when they’re used, and what to consider when choosing between PPO and lump sum.

In this guide

• What a PPO is
• When PPOs are appropriate
• Advantages of PPOs for claimants
• Disadvantages of PPOs
• PPO structures
• The ASHE 6115 index
• Court approval requirements
• Lump sum or PPO — how to decide
• Frequently asked questions
• Related guides
• Our Partner's Fees Explained
• Check If You Could Claim Compensation For Your Injury

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What a PPO is

A PPO is a court order or settlement agreement that requires the defendant (or their insurer) to pay the claimant an annual sum, indexed for inflation, for life or for a defined period. Key features:

• Annual payments rather than a single lump sum.
• Inflation-linked (typically by reference to ASHE 6115 for care costs, or RPI for other elements).
• Continue for life (or until specified milestone, e.g. age 65 for earnings loss).
• Paid by the defendant’s insurer, who must maintain capacity to fund the obligation.
• Backed by statutory protection — the insurer’s commitment is binding and the FSCS provides additional protection.

When PPOs are appropriate

PPOs are most commonly used for:

• Care costs — particularly suitable because care needs and care costs typically rise with inflation.
• Loss of earnings — for lifelong loss, an annual payment can match the salary the claimant would have earned.
• Catastrophic injury cases — brain injury, spinal cord injury, very serious amputation — where lifetime needs are real and substantial.
• Cases where the claimant lacks capacity — PPOs reduce the risk of lump-sum mismanagement.
• Cases where longevity is uncertain — PPO removes the risk of either side getting longevity wrong.

PPOs are rare in low- and medium-value claims because the administrative cost of running them exceeds the benefit.

Advantages of PPOs for claimants

• Removes investment risk — no concern about outliving the lump sum or investment performance disappointing.
• Removes longevity risk — payments continue for life however long that turns out to be.
• Inflation protection — ASHE 6115 index typically rises faster than general inflation, protecting care costs over time.
• Tax-free — like lump-sum compensation, PPO payments are tax-free.
• Doesn’t affect means-tested benefits the same way as a lump sum can — though specific advice is needed on this.
• Reduces management complexity — for claimants who lack capacity, simpler to manage than a large invested fund.

Disadvantages of PPOs

• Lack of flexibility — once set, the PPO continues at the agreed annual amount. If needs change, additional funds aren’t accessible.
• No capital lump — can’t use the money for a one-off purchase (e.g. home adaptation, specialist vehicle) unless there’s a parallel lump-sum element.
• Insurer dependency — payments depend on the insurer maintaining capacity for decades. While protected by FSCS, this remains a slight ongoing concern.
• Inheritance limitation — payments cease on the claimant’s death (typically). If the claimant dies young, the total payout may be less than a lump sum would have provided.
• Less attractive to younger claimants — who may prefer to take a lump sum and manage their own affairs.

PPO structures

Typical PPO structures:

• Pure PPO — all of the future loss element is paid as annual PPO. Rare in practice.
• Hybrid — most common. Lump sum covers general damages, past losses, equipment, accommodation, immediate care costs. PPO covers long-term care and (sometimes) earnings loss.
• Stepped PPO — annual amount changes at defined milestones (e.g. increases at age 18 when the claimant moves to adult care arrangements).

The ASHE 6115 index

For care-related PPOs, the standard inflation index is ASHE 6115 — the Annual Survey of Hours and Earnings figure for “care assistants and home carers”. This index has typically risen faster than general inflation, providing strong protection against rising care costs.

Other indices used:

• RPI (Retail Price Index) — sometimes used for non-care elements.
• CPI (Consumer Price Index) — sometimes used.
• Bespoke indices for specific elements (treatment costs, equipment).

Court approval requirements

For PPOs involving children, protected parties, or fatal claims, court approval is required. The court considers:

• Whether the PPO is in the claimant’s best interests.
• The financial security of the paying party.
• The indexation provisions.
• How the PPO interacts with means-tested benefits.
• The split between lump sum and PPO elements.

For adult claimants with capacity, court approval isn’t strictly required — but most PPOs are still approved by the court for the protection of all parties.

Lump sum or PPO — how to decide

The choice depends on the specific situation. Considerations:

• Lump sum better for — capable adult claimants confident in financial management, those with shorter expected duration of loss, those wanting to make significant one-off purchases, those wanting capital to leave to family.
• PPO better for — protected parties, those lacking capacity, those with strong longevity factors (e.g. young claimants with very serious injuries), those whose primary need is care funding, those particularly risk-averse.
• Hybrid often best — combines lump sum for immediate needs and capital flexibility with PPO for long-term care security.

Specialist financial advice from an IFA experienced in personal injury cases is often valuable alongside legal advice.

Frequently asked questions

Are PPOs guaranteed for life?

Yes — for the duration set by the order, typically life. The defendant’s insurer must continue paying. The Financial Services Compensation Scheme provides backup protection if the insurer fails.

What happens to the PPO if the claimant dies?

Payments cease (in most cases). PPOs are typically life-only — they don’t continue to the estate. This is a key disadvantage for claimants with dependants, where a lump sum can leave inheritance.

Can the PPO be assigned to a trust?

Generally not — PPOs are personal to the claimant. They can’t be assigned, sold, or transferred. Some specific arrangements allow the funds to be received by a personal injury trust on the claimant’s behalf, but the underlying entitlement is personal.

How does a PPO affect benefits?

PPO payments are generally treated more favourably than lump sums for means-tested benefits — they don’t accumulate as capital. But there are specific rules and specialist benefits advice is essential before settling.

Can I have both PPO and lump sum?

Yes — this is the most common arrangement (hybrid settlement). Lump sum for one-off needs and accumulated past loss; PPO for ongoing future needs.

What if the defendant’s insurer goes bust?

The FSCS provides protection up to 100% of compensation due in PI insurance cases. So even if the insurer fails, the PPO payments continue from the FSCS guarantee fund. This protection is one reason PPOs are increasingly regarded as very secure.

Can a PPO be varied later?

Generally no. Once set, it’s set. The Damages (Variation of Periodical Payments) Order 2005 allows variation only in narrow circumstances — typically where the claimant’s condition deteriorates beyond what was contemplated at the time of the order. Variations are rare.

Related guides

• The discount rate explained
• Special damages explained
• Claiming for someone lacking capacity
• Fatal accident claims explained
• Interim payments before settlement

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