CHANGE TO THE SPECIAL ACCOUNT RATE: DOWN TO 0.1%: PRACTICAL IMPLICATIONS

This morning the Ministry of Justice announced a reduction of interest rates for the Courts Funds special and basic accounts, effective from today (1st June 2020).

THE ANNOUNCEMENT

“Due to the impact of Covid-19, the Bank 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.”

THE IMPACT FOR PERSONAL INJURY PRACTITIONERS

The rate on which interest for special damages is awarded, certainly in relation to losses continuing to the date of trial, is half the Special Account Rate.     This was already low but is now obviously much lower.

It may also have an impact on the question of whether money should be paid in court following a settlement for a protected party. The money will, effectively, decline in value.     There is much to be said for looking for alternative investments that provide security and which will obtain the approval of the court.