Discount Rate Seminar takes place in Manchester
March 9, 2017
Over 70 delegates attended Exchange Chambers’ Discount Rate Seminar at the Radisson Blu Edwardian Hotel in Manchester this week.
The half day event featured presentations from:
- Bill Braithwaite QC – Exchange Chambers – Duffer’s Guide to the Discount Rate
- Richard Cropper – Personal Financial Planning – Wells v Wells
- Catherine Howells – Exchange Chambers – Roberts v Johnstone
- David Knifton – Exchange Chambers – Consultations: What’s Next?
Bill Braithwaite QC was one of those who helped to change the discount rate many years ago and has been arguing for a further reduction to the rate ever since. He commented:
“This seminar was organised following the Ministry of Justice’s announcement last week that the discount rate would drop from 2.5 per cent to minus 0.75 per cent. The Lord Chancellor is starting another consultation process to see whether this new rate is correct. It is possible, therefore, that the rate will change again in six to twelve months’ time.
“My personal view is that for many years, claimants who have suffered significant or catastrophic injuries have been under-compensated. Until comparatively recently, they were given a lump sum which had been calculated on the basis that, without running any risks, they would be able to invest that money and live off it for life. The lump sum calculation assumed that they would be able to achieve a net real rate of return on their investment of 2.5%, which broadly equates to about 7% gross – before tax is deducted, and before account is taken of inflation.
“We have all known for years that the safest method of investment is, or was, gilts – government, index-linked, treasury stock. The House of Lords decided in 1998 that gilts were the correct method of estimating how much investment return a claimant could be expected to make, because they were risk-free. The Lord Chancellor has used the reasoning in that case to come to the rate of minus 0.75 per cent.”