As a result of the Covid-19 pandemic, and the decision of the Bank of England to reduce the base rate to 0.1% on 19th March 2020, the Ministry of Justice has taken the decision to reduce the Special Account Rate from 0.5% to 0.1%. This change was effective from 1st June 2020.
This change will have implications of which Personal Injury practitioners need to be mindful.
Where a claimant suffers a recurring loss continuing to the date of trial, interest on this loss accrues at half the Special Account Rate. The amount of interest that the claimant will recover will therefore now fall from 0.25% to 0.05%. Whilst this may be negligible in some cases, for example where the losses are not appreciable or where interim payments diminish past losses, in larger claims the reduction in interest recoverable could be significant.
The reduction in the Special Account Rate will also particularly bite for the protected claimant. Where funds are required to be paid into Court for the protected party, the damages will now attract such a low rate of interest that in real terms the monies will fall in value. Practitioners may therefore wish to explore alternative investment plans which will yield a higher rate of return for the claimant. Any such plan would still require the approval of the Court.
It remains to be seen in these uncertain times for how long the Special Account Rate will stay at this unprecedented low level. It could be some time. The prudent practitioner might therefore wish to take stock of his/her files and take necessary action to meet the impact of this change.