Personal injury discount rate: inflation index and determining the judicial rate of interest

The Personal Injury Discount Rate (PIDR) is an adjustment of an award of damages to reflect the fact that the injured person is able to invest the money before the loss or expense for which it awarded has actually occurred.  That investment will generate a return and the PIDR aims to take that into account so as to avoid over- or under-compensation.  Currently, there is provision for an adjustment to the rate of return to take account of inflation by reference to the Retail Prices Index (RPI) or to an alternative source of information as prescribed by Scottish Ministers in regulations subject to the affirmative procedure.  RPI no longer remains a suitable inflation index measure.  The Scottish Government consulted on the appropriate inflation measure to be referenced in legislation for the PIDR, and including whether whatever inflation measure should be capable of being modified.

A periodical payment order (PPO) is a court order which requires a defender to pay damages compensation in the form of annual or regular payments to the pursuer rather than via a single lump sum payment.  They tend to be used in cases where substantial damages have been awarded.  In future, PPOs will need to include a requirement for the amount of payments to be altered at intervals.  This allows the real value of periodical payments to be preserved over the whole period for which they are payable.  In the absence of provision to the contrary the amount of payments is to be altered by reference to the RPI, with rules of court prescribing the timing, frequency and manner of alterations.  The Scottish Government consulted on the appropriate inflation measure to be referenced in legislation for PPOs.

Finally, the consultation asked a series of questions about how the judicial rate of interest (JRI) should be determined.

The Scottish Government’s consultation opened on 17 November 2025 and closed on 28 January 2026.  A total of 21 responses were received – 2 from individuals and 19 from organisations.

The analysis of those responses can be accessed below.

With regard to the PIDR, the responses demonstrate that there is support for amending the inflation index referenced in legislation and providing that the measure is capable of being modified.  While the majority said that the inflation index should be capable of being modified by the rate-setter our preference is that any such modification should be set out in regulations in advance of the PIDR determination.  This approach more closely reflects the underlying policy approach to review of the PIDR, that the parameters for conducting any such review are clearly set out in legislation.

Regarding PPOs, it is clear from the responses that the default inflation index referenced in legislation should be changed but without affecting the flexibility of the courts to make a PPO prescribing a different inflation index.

On the JRI, there appears to be a consensus on the general framework for determining the rate but we consider that more work is required to determine what the rate should be.

The Scottish Government would intend to bring forward provisions to make changes to the law at the next legislative opportunity.