Part 2: Personal Injury Discount Rate Section 10: Assumed rate of return on investment of damages. Schedule A1
Section 10(2) contains the new Schedule A1 which is inserted into the Damages Act 1996.
	Matters dealt with in the new schedule are as follows: paragraphs 1 and 2 introduce a requirement for the Lord Chancellor to start a review of the discount rate within 90 days beginning with the day on which the Act is passed (see section 14 and related commentary) and thereafter to start a review at least once every five years from the conclusion of the previous review. The objective of every review is to decide whether the rate should be retained or changed (see paragraph 9(2)-(4) of new Schedule A1 and related commentary as to the interpretation of this requirement where there is or will be no rate).
	In conducting the first review and determining the rate of return the Lord Chancellor is required to consult the Government Actuary within 20 days of the start of the review and the Government Actuary must respond within 80 days of being consulted. Paragraph 3 requires the Lord Chancellor for subsequent reviews to obtain the advice of an expert panel, which will be chaired by the Government Actuary. The expert panel must respond within 90 days of the Lord Chancellor’s request. The Lord Chancellor must also consult HM Treasury. If the office of Government Actuary is vacant, the Deputy Government Actuary is to act instead.
	The first review must be completed within 140 days of its commencement and subsequent reviews within 180 days (in both cases the date of commencement will be decided by the Lord Chancellor).
	Paragraph 4 contains provisions relating to the core principles and assumptions to be applied by the Lord Chancellor in determining the rate. Paragraph 4(2) provides that the rate to be set is the rate of return that in the Lord Chancellor’s opinion could reasonably be expected to be achieved by a claimant investing a lump sum of relevant damages (defined in paragraph 4(7)) with the objective of covering all the expected costs and losses caused by the injury at the right time when they arise; and, with the further objective that when this has been achieved, there is no money left from the lump sum and the income it generated during the period of the award. In forming this opinion, the Lord Chancellor is required to make certain assumptions (and may make others) and to take certain factors into account (which does not rule out taking other factors into account). The specified assumptions are set out in paragraph 4(3). They include that the recipient of the relevant damages receives proper investment advice; invests in a diversified portfolio of investments; and has a low-risk investment profile. This profile means the recipient is assumed to be willing to take more risk than the very cautious investor envisaged under the present law relating to the setting of the discount rate, but less risk than would ordinarily be taken by a prudent and properly advised individual investor who does not have the same investment objectives as the recipient of relevant damages. The intention is that the level of risk assumed in the setting of the discount rate will therefore be higher than is assumed under the present law. The specified factors are set out in paragraph 4(5). This sub-paragraph requires the Lord Chancellor to have regard to: the actual returns available from such diversified portfolios, the actual investments made by investors of relevant damages; and to make appropriate allowances for taxation, inflation and investment management costs.
	On concluding a review, the Lord Chancellor is required to give reasons for his or her decision on the rate and to publish such information about the response, on the first review, of the Government Actuary, and, on subsequent reviews, of the expert panel established for the relevant review, as he or she thinks appropriate. Paragraphs 6 and 7 contain provisions relating to the establishment of an independent expert panel which the Lord Chancellor is to consult in setting the rate. The paragraphs provide for the panel to be chaired by the Government Actuary, and to contain four other members, namely members with experience respectively as an actuary, as an economist, in managing investments, and in relation to consumer financial investments. The panel is to be appointed for each review; but serving on the panel in relation to one review will not disqualify an appointee from serving on the panel for another review. The panel dissolves when it has responded to the Lord Chancellor’s consultation. The cost of the panel will be met by the Lord Chancellor, who may enter into arrangements with other government departments so that they can assist, such as by providing a secretariat to the panel. Meetings of the panel will not be quorate unless there are four members present, including the Government Actuary (or if that post is vacant, the Deputy Government Actuary). As there may be more than one review ongoing at any time (see paragraph 8 of new Schedule A1 and related commentary) provision is made for individuals to be members of more than one panel.
	Paragraph 8 contains provisions as to how the Schedule should apply if two or more discount rates are prescribed as a result of a review. Different rates might, for example, be prescribed for different durations of loss (see paragraph 30 above). The requirements as to when and how a review is conducted will apply separately to each rate. This enables the Lord Chancellor to carry out reviews of different rates separately at different times, but different rates may also be reviewed at the same time (in the latter case one or more members of the panel for the review of one rate might also be members of the panel for another rate).