Compensation claims.

Personal Injury Compensation: How the Ogden Discount Rate Works

People who suffer serious and life-changing injuries may receive compensation for financial losses that will continue for many years.

A lump-sum award may need to cover future care, medical treatment, specialist equipment, accommodation, loss of earnings and other expenses for the remainder of the claimant's life.

When calculating these future losses, courts apply the Personal Injury Discount Rate, often referred to as the Ogden discount rate.

The rate in England and Wales is currently +0.5%. It took effect on 11 January 2025, replacing the previous rate of −0.25%.

What Is the Personal Injury Discount Rate?

The Personal Injury Discount Rate is an assumed real rate of return used when calculating compensation for future financial losses paid as a lump sum.

The principle is that a claimant can invest the compensation and earn a return over time.

The court therefore adjusts the initial lump sum to reflect:

• the expected investment return;


• future inflation;


• taxation;


• investment-management costs;


• the length of time the money must last; and


• the claimant's need to avoid excessive investment risk.

The objective is to provide full and fair compensation without deliberately under-compensating or over-compensating the injured person.

What Are the Ogden Tables?

The Ogden Tables are actuarial tables used by lawyers, insurers, experts and courts when calculating future financial losses in personal injury and fatal accident cases.

They provide multipliers based on factors including:

• the claimant’s age;


• sex;


• life expectancy;


• the period over which a loss will continue;


• the discount rate;


• employment prospects; and


• the likelihood of disability affecting future earnings.

The tables do not decide the amount of compensation by themselves. They form part of a broader assessment based on the medical evidence, care requirements and individual circumstances.

How Is Future Loss Calculated?

A future annual loss is commonly calculated using a multiplicand and a multiplier.

The multiplicand is the annual financial loss or expense. The multiplier represents the period and other factors that affect how long the loss is likely to continue.

For example, if a claimant will require care costing £50,000 a year, the court may multiply that annual cost by an appropriate Ogden multiplier.

The multiplier is not simply the number of years the claimant is expected to live. It reflects mortality and the assumed investment return represented by the discount rate.

Why Does the Rate Affect Compensation?

A higher positive discount rate assumes that the claimant can earn a greater return by investing the award.

This generally produces a smaller initial lump sum.

A lower or negative discount rate assumes that investment returns will be lower after accounting for inflation, tax and expenses.

This generally produces a larger initial award because more money must be provided at the outset to meet the same future needs.

The 2017 Change

Before March 2017, the discount rate in England and Wales had remained at 2.5% since 2001.

That rate was based substantially on the returns available from index-linked government bonds, commonly known as index-linked gilts.

As real gilt yields fell, concerns developed that the 2.5% assumption overstated what a cautious claimant could earn safely.

The Lord Chancellor therefore changed the rate from 2.5% to −0.75% with effect from 20 March 2017.

The reduction produced substantial increases in lump-sum awards for claimants with significant future losses.

Why Was the 2017 Decision Controversial?

Claimant representatives argued that the change was necessary because seriously injured people should not be required to take investment risks with compensation needed for lifelong care.

Insurers, public authorities and medical-defence organisations argued that the −0.75% rate resulted in excessively high awards because claimants would not normally invest all their compensation solely in index-linked gilts.

Concerns were raised about the effect on:

• motor insurance premiums;


• employers’ liability insurance;


• public liability insurance;


• the NHS clinical-negligence budget;


• local authorities;


• medical professionals; and


• businesses carrying large personal injury liabilities.

The Civil Liability Act 2018

The Civil Liability Act 2018 changed the legal framework used to set the discount rate in England and Wales.

The revised system assumes that a claimant invests in a diversified portfolio involving more risk than the very low-risk approach used under the earlier system, but less risk than an ordinary investor might accept.

The legislation requires the Lord Chancellor to consider matters including:

• the returns reasonably expected from the assumed investment portfolio;


• the duration of awards;


• inflation;


• tax;


• investment-management costs;


• the risk of investment underperformance; and


• the need to avoid exhausting the compensation prematurely.

An independent expert panel must be consulted during the statutory review process.

The 2019 Rate

Following the first review under the reformed system, the rate was changed from −0.75% to −0.25%.

The −0.25% rate took effect on 5 August 2019.

The increase reduced lump-sum awards compared with those calculated using the −0.75% rate, although awards remained higher than they would have been under the historic 2.5% rate.

The Current 0.5% Rate

Following the 2024 review, the Lord Chancellor set the rate at +0.5%.

The new rate came into force on 11 January 2025 and continues to apply in England and Wales as of July 2026.

The increase from −0.25% to +0.5% generally reduces the lump-sum value of future losses compared with awards calculated under the former rate.

The precise effect depends on:

• the claimant’s age;


• life expectancy;


• the length of the future-loss period;


• the annual value of care or lost earnings;


• whether losses increase with earnings or another measure of inflation;


• mortality assumptions; and


• any adjustments applied under the Ogden Tables.

Does the New Rate Reduce All Compensation?

No.

The discount rate principally affects compensation for future financial losses paid as a lump sum.

It does not directly determine:

• compensation for pain, suffering and loss of amenity;


• past loss of earnings;


• medical costs already incurred;


• care already provided;


• damage to property; or


• other losses that have already occurred.

However, in a catastrophic injury case, future care and earnings losses can form the largest part of the total award. A change in the rate can therefore make a substantial difference.

Who Is Affected?

The discount rate is particularly important in cases involving:

• brain injuries;


• spinal cord injuries;


• amputation;


• cerebral palsy caused by clinical negligence;


• serious birth injuries;


• loss of sight;


• severe burns;


• chronic pain conditions;


• reduced life expectancy; and


• long-term inability to work.

It can also affect dependency claims brought following a fatal accident.

What Future Losses Can Be Included?

Depending on the injury, compensation may include future costs for:

• professional care;


• case management;


• physiotherapy;


• occupational therapy;


• psychological treatment;


• private medical treatment;


• medication;


• prosthetics and wheelchairs;


• specialist vehicles;


• adapted accommodation;


• equipment replacement;


• loss of earnings;


• loss of pension;


• additional holiday costs; and


• deputyship or financial-management expenses.

Each claimed expense must be supported by appropriate evidence.

Compensation Is Not Limited to No-Fault Accidents

The original report described compensation as arising from a "no-fault accident". That expression is misleading in most personal injury cases.

A claimant will normally need to establish that another person or organisation was legally responsible for the injury.

This may involve proving:

• negligence;


• breach of statutory duty;


• breach of an employer’s duty;


• clinical negligence;


• liability for a defective product;


• responsibility for a road traffic collision; or


• another recognised legal basis for compensation.

Some schemes, such as the Criminal Injuries Compensation Scheme, operate on different principles and do not use the ordinary civil-liability process in the same way.

What if the Claimant Was Partly Responsible?

A claimant may still receive compensation where another party was principally responsible, but the claimant also contributed to the accident or injury.

This is known as contributory negligence.

The court may reduce the compensation by a percentage reflecting the claimant's share of responsibility.

The discount rate is then applied when calculating relevant future losses within the reduced award.

Periodical Payment Orders

A claimant does not always have to receive all future losses as one lump sum.

A court may make a Periodical Payment Order requiring the defendant or insurer to make regular payments, often annually.

Periodical payments are commonly considered for long-term care and case-management costs.

Potential advantages include:

• greater certainty that annual needs will be met;


• less investment risk;


• protection against the claimant living longer than expected;


• payments that may increase under an agreed index; and


• reduced risk of the lump sum being exhausted.

Potential disadvantages may include:

• reduced flexibility;


• continuing dependence on the paying body;


• difficulty adapting payments to unexpected needs;


• restrictions on inheritance after the claimant’s death; and


• the need to assess the security of the payments.

Lump Sum or Periodical Payments?

A serious injury settlement may combine:

• a lump sum for past losses and capital expenses;


• a lump sum for some future losses; and


• periodical payments for recurring care or treatment.

The appropriate structure depends on the claimant's circumstances, financial needs, family arrangements and attitude to investment risk.

Investment Risk

A seriously injured claimant is not in the same position as an ordinary investor seeking to maximise returns.

The compensation may be the claimant's only means of paying for:

• essential care;


• specialist accommodation;


• treatment;


• equipment;


• living expenses; and


• income lost because of disability.

A claimant who takes excessive investment risk may lose money needed for essential support.

Conversely, an investment strategy that is too cautious may fail to keep pace with inflation and the rising cost of care.

The Risk of Under-Compensation

If the assumed investment return is set too high, the initial award may be too small.

The claimant may then exhaust the fund before the end of their life or be unable to meet increases in care and treatment costs.

Unlike an ordinary investor, the claimant may have no opportunity to earn replacement income or rebuild capital.

The Risk of Over-Compensation

If the assumed return is set too low, the initial award may exceed the amount required to meet the claimant's assessed losses.

Defendants and insurers argue that excessive awards increase:

• insurance premiums;


• NHS liabilities;


• public-sector expenditure;


• business costs; and


• the cost of professional indemnity cover.

The rate-setting process attempts to balance these competing risks while maintaining the principle of full compensation.

Does a Higher Rate Mean the Claimant Receives Too Little?

Not necessarily.

The rate is based on assumptions applying across a broad range of cases. The court may also consider:

• the appropriate Ogden multiplier;


• life-expectancy evidence;


• future earnings inflation;


• care-cost inflation;


• contingencies affecting employment;


• whether a Periodical Payment Order is appropriate; and


• the evidence relating to the individual claimant.

However, the prescribed rate must generally be taken into account when assessing lump-sum future losses.

Can the Court Use a Different Rate?

The Damages Act permits the court to take a different rate into account where it considers that the circumstances justify doing so.

Departures from the prescribed rate are unusual and require a proper evidential and legal basis.

A claimant cannot usually obtain a different rate merely by arguing that they personally intend to invest more cautiously.

Different Rates Across the UK

Personal injury discount rates are set under separate legal arrangements in England and Wales, Scotland and Northern Ireland.

As of July 2026, the applicable rate is +0.5% in each jurisdiction, but the methods and legislation used to determine the rates are not identical.

A solicitor should apply the law relevant to the jurisdiction in which the claim is brought.

How Often Is the Rate Reviewed?

The Civil Liability Act framework requires the rate in England and Wales to be reviewed at least once every five years.

The review process includes advice from an independent expert panel.

This is intended to avoid the long periods without review that occurred under the earlier system, when the 2.5% rate remained unchanged from 2001 until 2017.

The Effect on Motor Insurance

A lower discount rate increases the value of some serious injury claims and can increase the liabilities faced by motor insurers.

A higher rate can reduce those liabilities.

The effect on individual insurance premiums is difficult to isolate because premiums are also influenced by:

• repair costs;


• vehicle technology;


• thefts;


• fraud;


• claims frequency;


• reinsurance costs;


• taxation;


• legal costs; and


• the insurer's pricing decisions.

It is therefore too simplistic to attribute a particular increase or reduction in every motor premium solely to the discount rate.

The Effect on the NHS

The NHS faces substantial liabilities arising from clinical negligence claims involving severe and lifelong injuries.

A lower discount rate increases the accounting value and settlement cost of many future-care claims.

A higher rate generally reduces the lump sums required for those future losses.

However, the NHS remains responsible for ensuring that legitimately injured patients receive compensation sufficient to meet their assessed needs.

Interim Payments

Serious injury claims can take several years to conclude because the long-term medical prognosis and care needs must be established.

Where liability has been admitted or the legal requirements are met, the claimant may seek interim payments before final settlement.

These can help fund:

• immediate care;


• rehabilitation;


• adapted accommodation;


• equipment;


• lost income; and


• other urgent needs.

An interim payment is normally deducted from the final compensation.

Do Not Settle Before the Prognosis Is Clear

A final settlement is generally made on a full and final basis.

Once accepted or approved by the court, the claimant will not normally be able to reopen the case merely because:

• the condition deteriorates;


• care becomes more expensive;


• investment returns are lower than expected;


• the claimant lives longer than predicted; or


• a new treatment becomes necessary.

Medical, care, accommodation and financial evidence should therefore be sufficiently developed before settlement.

Provisional Damages

In limited cases, the court may award provisional damages where there is a recognised risk that the claimant may develop a serious disease or suffer a serious deterioration in the future.

The claimant receives compensation based on the current condition but may return to court if the specified event occurs.

Provisional damages are not available merely because the future is generally uncertain. The legal requirements are specific, and specialist advice is required.

Financial Advice After Settlement

A substantial award must often be managed for many years.

The claimant may need advice about:

• investment strategy;


• cash-flow planning;


• taxation;


• means-tested benefits;


• personal injury trusts;


• property purchases;


• deputyship;


• care costs;


• inheritance planning; and


• protection against fraud or financial abuse.

Financial advice should be obtained from a suitably regulated adviser with experience of personal injury awards.

Personal Injury Trusts

A personal injury trust may help protect compensation when entitlement to means-tested benefits or local-authority support is assessed.

The compensation must be managed according to the trust terms and the applicable benefits rules.

There are strict time considerations, and the claimant should obtain advice promptly rather than waiting until the compensation has been spent or mixed with other funds.

Claims Involving Children or Protected Parties

A settlement involving a child or an adult who lacks capacity to conduct the litigation normally requires court approval.

The court will consider whether the amount and settlement structure are in theclaimant'ss best interests.

Funds may be:

• held by the court;


• placed into an approved investment arrangement;


• managed by a deputy;


• protected through a trust; or


• combined with periodical payments.

How a Personal Injury Solicitor Can Help

A specialist solicitor may assist with:

• establishing liability;


• obtaining medical and rehabilitation evidence;


• calculating past and future losses;


• applying the Ogden Tables;


• assessing the correct discount rate;


• obtaining interim payments;


• considering periodical payments;


• negotiating with insurers;


• arranging court approval;


• setting up a personal injury trust; and


• coordinating financial and Court of Protection advice.

The Current Position

The dramatic increase in awards described in the original 2017 report resulted from the change from +2.5% to −0.75%.

The legal framework was subsequently reformed, and the rate increased to −0.25% in 2019.

Following the latest statutory review, the rate in England and Wales is now +0.5% for awards assessed from 11 January 2025.

This generally reduces lump-sum future-loss awards compared with the previous rate. Still, the purpose remains the same: to provide sufficient compensation to meet the injured person's properly assessed future needs.

Finding a Personal Injury Solicitor

Use the search facility at the top of this page to find a personal injury or clinical-negligence solicitor experienced in serious injury claims, future-loss calculations and periodical payments.

Disclaimer

Solicitors.com is not a firm of solicitors. This article provides general information about personal injury compensation in England and Wales and does not constitute legal, investment or financial advice. The value and structure of an award will depend on the evidence and individual circumstances.

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