Periodical payments are generally put in place to cover a client’s biggest costs, which are usually care and case management. For this reason, they form an integral part of the client’s overall financial plan, as they provide certainty for the future as these crucial costs will be met regardless of whether they have a sufficient capital lump sum or not. Therefore, any error in these payments can substantially reduce a client’s ability to meet their needs and affect their financial security for life.
Our specialist serious injury team at Tilney includes advisers and technical specialists dedicated to working with clients who have been affected by personal injury or clinical negligence. If a client receives periodical payments, we can help trustees and deputies by checking the Schedule to the Order and carrying out annual checks to ensure the correct amount is paid if requested.
The rise of periodical payments as part of an award
The landmark Thompstone v Tameside judgement in January 2008 confirmed that the earnings survey, the Annual Survey of Hours and Earnings, could be used instead of the Retail Prices Index for certain requirements such as care and case management, which has increased the value of periodical payments to claimants. Since then, we have seen the number of periodical payments made as part of an award increase significantly.
Periodical payments – a case study*
Mr L received a settlement comprising a lump sum and periodical payments. The first periodical payment of £400,000 was made on 15 December 2018.
In the Consent Order, we would have ordinarily expected the December 2018 periodical payment to be itemised and payable (without indexation) on 15 December 2018, i.e. £400,000. This was correctly stated in paragraph 1.1, part 2 of the Schedule to the Order, however, in paragraph 3 it went on to say that the December 2018 payment is subject to indexation. Based on the definitions in paragraph 3, we calculated that Mr L should have received £416,333.94 on 15 December 2018. This was ignored by the Defendant and they simply paid £400,000 to Mr L.
We also determined that some of the dates specified in the Schedule to the Order were a year out of date, so the formulae used by the Defendant were wrong. This issue would not resolve itself over time and intervention was required.
Based on the Order as it was drafted, we calculated that the December 2019 payment should have been £415,970.96, whereas the Defendant’s calculation was £400,349.04.
Furthermore, if we followed the model order, the December 2019 payment would have been £413,961.61. The Defendant’s calculation did not follow either the model order or the actual order.
Had these errors not been identified, Mr L’s periodical payments would have likely continued to be incorrect for several years. If we consider the Defendant’s calculation against the model order, Mr L would have received £13,612.57 less than what he should have in December 2019. This would have continued in the subsequent years, leading to higher discrepancies.
Without the help of a financial planner, Mr L would have inevitably become more reliant on his capital lump sum and considerably depleted it. This could have led to significant financial hardship.
Speak to Tilney
With vast experience in the field of serious injury, we provide advice tailored to your client’s specific needs and the nature and severity of their injuries. To find out more about how we can help, call us on 020 7189 2400 or book a free initial consultation online.
*This case study is based on a real-life client scenario. Names have been changed to protect the client’s identity.
Issued by Tilney Financial Planning Limited
This article was previously published on Tilney prior to the launch of Evelyn Partners.