Paragraph 4 Determining the rate of returnF1

(1)

The Lord Chancellor must comply with this paragraph when determining under paragraph 2 or 3 whether the rate of return should be changed or kept unchanged (“the rate determination”).

(2)

The Lord Chancellor must make the rate determination on the basis that the rate of return should be the rate that, in the opinion of the Lord Chancellor, a recipient of relevant damages could reasonably be expected to achieve if the recipient invested the relevant damages for the purpose of securing that—

(a)

the relevant damages would meet the losses and costs for which they are awarded;

(b)

the relevant damages would meet those losses and costs at the time or times when they fall to be met by the relevant damages; and

(c)

the relevant damages would be exhausted at the end of the period for which they are awarded.

(3)

In making the rate determination as required by sub-paragraph (2), the Lord Chancellor must make the following assumptions—

(a)

the assumption that the relevant damages are payable in a lump sum (rather than under an order for periodical payments);

(b)

the assumption that the recipient of the relevant damages is properly advised on the investment of the relevant damages;

(c)

the assumption that the recipient of the relevant damages invests the relevant damages in a diversified portfolio of investments;

(d)

the assumption that the relevant damages are invested using an approach that involves—

(i)

more risk than a very low level of risk, but

(ii)

less risk than would ordinarily be accepted by a prudent and properly advised individual investor who has different financial aims.

(4)

That does not limit the assumptions which the Lord Chancellor may make.

(5)

In making the rate determination as required by sub-paragraph (2), the Lord Chancellor must—

(a)

have regard to the actual returns that are available to investors;

(b)

have regard to the actual investments made by investors of relevant damages; and

(c)

make such allowances for taxation, inflation and investment management costs as the Lord Chancellor thinks appropriate.

(6)

That does not limit the factors which may inform the Lord Chancellor when making the rate determination.

(7)

In this paragraph “relevant damages” means a sum awarded as damages for future pecuniary loss in an action for personal injury.

Annotations

Textual amendments

F1: Sch. A1 inserted (E.W.) (20.12.2018) by Civil Liability Act 2018 (c. 29), ss. 10(2), 14