A review of how compensation is calculated in Scotland has piled additional pressure on to people with life-long life-changing injuries.
The Scottish Government has consulted on whether any of the factors which are taken into account when setting the personal injury discount rate should be altered. The personal injury discount rate is used to calculate lump-sum compensation payments and is due to be updated this year.
“The Scottish Government has failed to revise the speculative portfolio of investments used to set the discount rate. The hypothetical portfolio is supposed to reflect what an injured person would do with their lump-sum compensation payment and what returns they could expect to make. But there is little recognition of the fact that people with catastrophic injuries do not behave like other investors,” explained Gordon Dalyell, executive committee member for the Association of Personal Injury Lawyers (APIL).
“Injured people’s needs are very specific and they are often fearful of losing the money. When the assumptions for calculating compensation are wrong, there is a very real risk that severely injured people will be undercompensated,” he said.
As a result of this latest consultation, compensation in Scotland will be calculated on the basis that injured people will invest their money over a longer period of time - 43 years, rather than 30 years which APIL believes is more realistic.
“Seriously injured victims of negligence will now have even more pressure on them to ensure they make savvy investments, so that their compensation will last,” said Mr Dalyell.
“It is wholly unfair to assume that someone with life-changing injuries is willing to invest their compensation for longer in a bid to reap greater returns. They simply do not think that way. In fact, they often delay any investments they do make for several years while they set up adaptations to their homes, buy equipment, and adjust to their new lives,” he explained.
The Scottish Government also said regulations will be made to increase the allowance for the cost of professional advice on tax and investments, which injured people pay for from their compensation. The allowance will be increased from 0.75 per cent to 1.25 per cent.
“It is a step in the right direction but it falls far short of the 2 per cent our research shows injured people really pay for advice,” said Mr Dalyell.
“All these poor assumptions about the financial needs of injured people are a recipe for this very vulnerable group running out of the money they need for their care and support”.