With effect from 1 June 2020, the interest rates payable on money held by the Court Funds Office have dropped as a result of the Bank of England’s interest rate change to 0.1% from 19 March 2020. The interest payable on special damages in personal injury claims is reduced as it reflects the rate payable on the Courts Funds Office Special Account.
The Ministry of Justice published the following statement:-
“Due to the impact of COVID-19, the Bank of England reduced the base rate to 0.1% on 19 March 2020 as an emergency measure and made a decision on 07 May 2020 to maintain that rate until further notice. In response to this, the Lord Chancellor has reviewed the Court Funds Office (CFO) rates of interest payable to clients and has directed that from Monday 1 June 2020 these will change to the following:
- Special Account – reduces from 0.5% to 0.1%
- Basic Account – reduces from 0.1% to 0.05%
The Lord Chancellor has made this decision to ensure that the running costs of the CFO service can continue to be met and that a rate of interest payable to clients can still be provided throughout this period. Should the Bank of England base rate rise in the future, the Lord Chancellor will review the level of interest paid to clients further.”
Given the low levels of interest payable, representatives of protected parties may be more likely to seek approval of the Court to invest the money externally (provided that the external investment carries limited risk), but this will also impact on the interest payable on special damages (calculated at half the Special Account Rate – i.e. 0.05%) in larger claims. Whilst interest rates were already low (£250 for a year’s interest on £100,000 at half the old rate, £50 at half the current rate), calculation of interest can make a difference in whether a Part 36 offer is beaten at Court or not.
For more information or advice, please contact a member of our casualty team.
