The Discount Rate is the figure which is ordinarily used when calculating lump sum compensation payments for future losses in high value personal injury claims.  It is designed to reflect the rate of return to be expected upon investment of the compensation awarded and is calculated using a rate aimed to put the claimant in the same financial position as if they had not been injured.

The decision to dramatically reduce the Isle of Man discount rate follows a review of the UK Ministry of Justice’s consultation into the methodology on which the old rate was based[2] and advice from the UK Government Actuary Department in relation to factors specific to the Isle of Man.

The discount rate was last set by Treasury in 2014.  It was challenged in the High Court[3] in 2017 on the basis that the rate of 2.5% was said to no longer reflect the rate of return which might be achieved upon investment of a lump sum award.  However, the challenge failed with the Court confirming that the rate set by Treasury would be upheld by the Courts and only departed from in exceptional cases where the specific facts of the case meant that a different rate would be more appropriate, until such time that it was amended by Treasury.  The case in question was not considered exceptional.

The new discount rate of -0.25% came in to operation on 17 June 2020, following approval of The Damages (Personal Injury) (Assumed Rate of Return) Order 2020 by Tynwald on 16 June 2020 and will apply to all future awards which compensate for future loss.

The reduction will substantially increase the sums which may be awarded in high value cases involving a significant degree of future losses.

A copy of The Damages (Personal Injury) (Assumed Rate of Return) Order 2020 can be found here.


[1] The Damages (Personal Injury) (Assumed Rate of Return) Order 2020
[2] https://www.gov.uk/government/consultations/setting-the-personal-injury-discount-rate-government-actuarys-advice-to-the-lord-chancellor
[3] De Yoxall v Moore [4 August 2015] ORD 2009/17 (Unreported)
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Claire Corkish

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