As promised during the last review, the Northern Ireland Department of Justice has launched a consultation; The Personal Injury Discount Rate: Taking Account of Inflation. The consultation is open for ten weeks and closes on 23 January 2026.
In the first review of the Personal Injury Discount Rate in Northern Ireland under the process set out in Schedule C to the Damages Act 1996 in 2019, RPI was applied as the appropriate index of inflation:
9 (2) The impact of inflation is to be allowed for by reference to, whether indicating an upward or downward trend—
(a) the retail prices index, or
(b) some published information relating to costs, earnings or other monetary factors as is, for use instead of the retail prices index, prescribed in regulations made by the Department of Justice.
(3) In sub-paragraph (2), “the retail prices index” means the general index (for all items) published by the Statistics Board or, if that index is not published for a relevant month, any substituted index or index figures published by that Board.
In 2024, the Government Actuary advised that RPI was no longer the correct measure to use. In considering what the correct measure would be, it was decided that the wording of section 9(2) meant that only a single unadjusted index could be applied to the calculation.
In its report, Personal Injury Discount Rate: Regulation Features Advice, the Government Actuary had made it clear that:
At a high level the choice is between a prices or an earnings inflation index. An earnings based index would potentially overestimate the inflation experienced in practice and a prices based index would potentially underestimate the inflation experienced in practice, assuming pursuers face a mix of heads of loss that are subject to both inflationary pressures.
Given that the department was limited to a single unadjusted rate, it decided it could only apply either an existing prices-related index or an existing earnings-related index – it chose an earnings-related index: annual weekly earnings (AWE). The same approach was adopted in Scotland.
By way of comparison, in England & Wales, the Lord Chancellor is simply required to make such allowance for inflation as he or she thinks appropriate. This allows the Lord Chancellor to use an adjusted index, building more flexibility into the process and avoiding the need to apply either a prices based index which would, as noted by GAD, potentially underestimate inflation, or an earnings based index which would potentially overestimate inflation.
In this consultation, the department now wishes to consider whether there should be more flexibility into how the Government Actuary can account for the impact of inflation when setting the personal injury discount rate in Northern Ireland, and if the answer to that is yes, how that is best achieved. The consultation also asks for views as to which is the best inflation index to apply and whether the impact of inflation on lump-sum awards in Northern Ireland is likely to be the same as that experienced in England & Wales.
DAC Beachcroft will be responding to the consultation and should you wish to discuss it please contact a member of our Strategic Advisory Team.
