The Ministry for Victims and Community Safety in Scotland has launched a "consultation on the inflation index for the calculation of the personal injury discount rate and the methodology for calculating the judicial rate of interest." The consultation, which poses 14 specific questions, closes on 23 January 2026.
The Personal Injury Discount Rate (PIDR) in Scotland is currently +0.5%, a rate set in September 2024. The methodology for determining the discount rate for Scotland, is set out in schedule B1. of the Damages Act 1996 (“the Act”).
The Act reformed the law, putting in place a new statutory regime for calculating the discount rate. The rate is based on returns from a hypothetical investor investing in a notional investment portfolio over 43 years. Deductions are then made to the rate of return to take into account: inflation (in order to provide a rate of return net of damages inflation); taxation; the cost of investment advice; and to reduce the risk of under-compensation.
When the Scottish Government considered the PIDR in 2024, the view was taken that there was not the flexibility to prescribe an adjusted inflation index in regulations and that the selection of either a prices-based index or an earnings-based one would lead to under or over compensation respectively of the injured person.
The purpose of this consultation is stated to be "to seek views on this matter so that going forward the legislation has the needed flexibility to ensure that an injured person is fully compensated, no more or no less."
The consultation also seeks views on the judicial rate of interest (8% on post-decree awards), a rate in place for more than 30 years and which the announcement states, is viewed by a number of stakeholders as not being at an appropriate level, particularly at a time when interest rates are significantly lower.
In addition, the consultation raises the question of Periodical Payment Orders (PPOs) and what inflation index should be used in calculating the same.
For details of the consultation launched in respect of the PIDR in Northern Ireland, please see out alert The Personal Injury Discount Rate in Northern Ireland – Preparing for the Next Review.
Any of our clients who wish to discuss the consultation are invited to contact the authors or a member of our Strategic Advisory Team.
