Legal News

The advantages of compensation awards as periodical payments

Date: January 07, 2020 by idu-net

If you’ve been unfortunate enough to suffer an accidental injury (at work, in a road traffic accident or as a consequence of medical negligence) then of course IDU Legal will fight hard to get you the compensation you deserve.


The aim of any compensation award is generally to put you back in the position you would have been in were it not for the accident or injury – so far as that is possible. The more  catastrophic the  injury, such as spinal cord or brain injury, the more important  it is to make sure that you have sufficient funds to cover the care and support you will need in the future, ensuring that sufficient funds remain available to meet your needs over the long term, for the rest of your life.



The disadvantages of lump sum awards in serious injury cases


In most successful personal injury compensation claims, damages are paid by way of a single lump sum.  It may seem advantageous to have all the money up front, but lump sum settlements mean that the injured client and their family are then faced with the onerous task of managing and investing that fund so that it lasts.


Even with professional advice, if badly invested or mismanaged, you face the risk of running out of funds to support any care needed in later life. This uncertainty about future income often led to people trying to preserve the fund rather than making the provision they needed here and now. If the range of care required expanded with age (as is often the case with serious brain injury for example) a concern is that a lump sum might not cover any inflation in future care costs.



Periodical payments


Nowadays, in catastrophic personal injury claims a lump sum payment may not be appropriate, especially in circumstances where there is uncertainty about life expectancy. Instead, the injured individual and their family need to consider all options.  If the parties’ agree and the individual is happy to settle their claim in this way, an application will be made to the Court to  make an Order that all or part of the damages – usually the element of care and loss of earnings – is paid in the form of a continuing series of regular, life-long, annual payments, known as periodical payments.



Providing certainty


Periodical payments are paid by the other party’s insurance company against whom the claim is brought. Periodical payments provide certainty for the future. The Court has the power to impose an Order for periodical payments without the consent of the parties if the judge believes that would be in the best interests of the injured person. However, this is very rare in cases where damages awarded are less than £1million.


In most cases, the Court will rule that a lump sum is paid immediately followed by periodical payments on a regular basis. This allows the existing and immediate needs of the injured person (e.g. provision of appropriate accommodation, immediate rehabilitation, aids and equipment etc) to be met without any delay. Thereafter the periodical payment provides the injured person with a predictable regular ‘income’ upon which they can rely for the rest of their life.



Practical and financial advantages of a periodical payment


Periodical payments are index-linked and in most cases the income received will not be taxed. This means that payments will increase according to inflation and so take away the worry of how to accommodate increasing costs of care (e.g. carers’ wages, if they are required). If it is probable that a person’s condition may deteriorate in future, the payments can be ‘staged’ so that they will increase to cover the increasing costs of more intensive care that may be needed over time. When the injured party is a young person, the annual sum payable may be increased at a later date to reflect the fact that their parents may no longer be able to provide care and more professional help is needed.



Interim payments


Periodical payments should not be confused with interim payments – which your lawyer will sometimes obtain on your behalf. Under the Rehabilitation Code, for example, defendants (or more accurately their insurers) are encouraged to immediately pay for therapies, treatments and aids in order to speed recovery. During the course of a claim, an individual may also receive regular interim payments to cover lost earnings and other accident-related expenses. However, where an interim payment has been made, the amount will be deducted from any final award to pay money or damages.


Our specialist solicitors have a wealth of experience in pursuing catastrophic, complex and high value claims. We can ensure that you receive the necessary expert advice in handling your claim and managing any compensation you may be awarded.