Ogden Rate Changed Again

08 Sep 2017

Ogden Rate to be increased

The Government has announced that it is to change the Ogden Rate, the rate used by UK courts in the calculation of personal injury (PI) lump sum settlements for serious injuries or death in a PI claim. In February 2017, the Government had announced a reduction in the Rate from 2.5% to minus 0.75% with effect from 20 March 2017, which would have increased the lump sum payment that will need to be paid to a seriously injured person in a personal injury case so as to generate a given stream of income over the remainder of their lives. The latest announcement means the Ogden rate will be set in relation to “low risk” investments, rather than “very low risk” investments, which in practice means the current -0.75% rate will rise to between 0%-1%, which will reduce the amount that will be paid in compensation. The change has been welcomed by insurers but criticised by personal injury lawyers. The Government also announced that the rate would be reviewed by  the government actuary and an independent panel of experts every three years.

The new proposal requires Parliamentary approval before coming into force.


How the Ogden Rate Works

Under the current rate, for every £1,000 awarded in a personal injury claim the insurer will be expected to pay the claimant £1,007.50. The claimant is predicted to earn -0.75% interest a year on the award, earning them the full £1,000 payment they are due. If the new rate is set at 0.5%, for example, then for every £1,000 of loss calculated, the insurer will pay out £995. The claimant would then be expected to earn 0.5% interest a year on the money awarded, earning them the full payment they are due. Under this scenario, the implementation of a 0.5% rate will cause payments to drop by £12.5 per £1000 awarded (compared with the current rate).

IRN Research Personal Injury Report August 2017

Association of Personal Injury Lawyers

Association of British Insurers



IRN Team

Leave a Reply

Your email address will not be published. Required fields are marked *