The MOJ is to announce today that the discount rate is set to increase to between 0%-1%.
The change will not come in immediately. Legislation will need to passed by parliament, which the MOJ suggests is likely to take months rather than weeks. It is said that there will be a review at least every three years.
This is potentially good news for the insurance industry, subject to scrutiny of the detail. It appears that the MOJ is taking a step back from the previous approach of an artificial, hypothetical, risk-free investment portfolio and instead is taking into account how claimants actually invest their compensation in the real world. A discount rate of 0% is still, however, unreasonably low when considering the investment returns available to claimants.
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