New Personal Injury Discount Rate (PIDR) explained

The Personal Injury Discount Rate (PIDR) in England and Wales is increasing to +0.5% from 11 January 2025. This is a change from the current rate, which has been set at -0.25% since August 2019. 

Here, Andrew Tindall from our medical negligence and serious personal injury team explains what the PIDR is and what this change means for those affected by serious personal injury.

What is PIDR?

The PIDR is a percentage that’s used to assess the amount of damages paid for future financial losses awarded (as a lump sum) to seriously injured individuals. This includes ‘heads of loss’ such as future care costs, medical expenses and lost income.

When an individual receives a large lump sum of compensation, that money can be invested and interest earned on it. The purpose of the PIDR is to adjust the award to account for these expected returns. With the correct amount of compensation and good investment, the individual should then have enough money to cover their needs for the rest of their life without being overcompensated and benefiting from their injuries.

The law assumes that those who’ve been injured shouldn’t take big investment risks. Therefore, the PIDR is set at a percentage rate to reflect the expected returns on very safe investments. 

What does the change in PIDR mean? 

The current rate of -0.25% assumes very little investment growth on compensation awarded. As such, the amount of compensation awarded is higher because there’s an assumption that it will earn little to no interest from investments. 

The new rate — which falls in-line with the current rate in Scotland and Northern Ireland — is higher, which assumes a slight increase on interest. The amount of money awarded will reduce as a result. 

PIDR example

Take, for example, an injured individual who needs £1m over 20 years to cover their future expenses. 

At -0.25%, the assumption is that there’ll be little to no growth on investment. Therefore, the lump sum would need to be around £1,020,000 to ensure that the money covers 20 years of expenses. 

With a rate of +0.5%, the assumption is that there’ll be a modest investment return. This means that the sum awarded would be around £950,000, with the extra growth from investments expected to make up the difference. 

Impact assessment 

The change in the PIDR increases the investment risk for injured individuals, highlighting the critical need for effective financial management to secure their long-term needs. 

That’s why our serious injury team collaborates with reputable, independent financial advisers who specialise in personal injury compensation. This ensures that our clients benefit from tailored strategies that will minimise risk and safeguard their future.

The change in rate is also likely to lead to greater reliance on periodical payment orders (PPOs), which provide annual payments instead of a lump sum. PPOs help to mitigate the increased financial risks associated with reduced lump-sum awards — offering a more stable and predictable income. We’re also experienced in assessing the need for PPOs and can advise you accordingly. 

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