Government must act now to help injured people invest for the future

Posted: October 25, 2012

Posted in: Personal Injury 

Vulnerable people with serious injuries should not be forced to invest in volatile stock markets to ensure they have enough money to meet their future needs, lawyers have said.

The Government is currently consulting on how deductions from the damages of injured people should be calculated.

The so-called “discount rate” is the amount by which personal injury compensation is reduced by the courts to ensure an injured person doesn’t make any profit by investing his damages.

“This is a critical issue affecting seriously injured people who are expected to invest their damages to meet their future needs, including the cost of future care,” said APIL president Karl Tonks.

“If the discount rate is not set accurately a victim of a catastrophic spinal injury, for instance, who may need round-the-clock nursing care for the rest of his life, could be short of hundreds of thousands, if not millions of pounds, and left unable to finance his future needs.”

The discount rate was set at 2.5% in 2001 by the Lord Chancellor and was based on yields generated by index-linked government stock (ILGS). It has never been reviewed, despite the fact that interest rates have plummeted during the recession. Many people suffering with the most serious of injuries have been left struggling as a result.

While the Government is not, at the moment, consulting on the rate itself, it is looking at how injured people should invest their compensation to provide for their own future. But rather than allowing people to continue to invest in government stock, which is considered a low risk investment, the Government is considering whether to calculate the rate based on a mixed portfolio of investments, which is far more risky.

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