The rate of -0.75% was set in September 2019. Today's announcement comes at the end of the review conducted by the Government Actuary under Schedule B1 of the Damages (Scotland) Act 1996, which commenced on 1 July. The principal reason for the change is the increase in investment return expectations since the last review, which has added significantly to the rate.
The increased discount rate will see damages for future losses reduced, in the light of greater investment returns from invested damages. This is obviously welcome news for insurers and other compensators.
Illustrated example: 40 year old male claimant with loss of earnings to age 65, no residual earning capacity and a £20,000 net salary.
The previous multiplier (not adjusted for contingencies) from Table 9 would have been 26.60 whereas now it will be 22.78
Future wage loss would have been £532,000 but will now be £455,600, a reduction of just over 14%
DWF submitted a detailed response to the Scottish Government consultation carried out prior to the Government Actuary's review. Andrew Lothian, Partner in DWF's Major Injury and Casualty team said: "Insurers and other compensators will welcome this news, which provides a fairer basis for calculating future losses, and certainty for the next five years. DWF was one of a number of organisations to respond to the Scottish Government consultation on the discount rate, and we are pleased that the Government Actuary has responded positively to evidence of stronger investment returns. Today's announcement of an identical discount rate in Northern Ireland brings the two jurisdictions into line, which is also extremely welcome."
We await confirmation on the implementation of the new rate, but expect insurers and claimant solicitors alike to begin using the new rate immediately.
