Effective April 30, 2014, new discount rates were recently announced by Chief Justice Hinkson of the Supreme Court of British Columbia pursuant to s. 56 of the Law and Equity Act, RSBC 1996, c. 253:
- For an injured plaintiff’s lost earning capacity claim or, in the case of wrongful death, a loss of dependency claim, the discount rate has been changed from 2.5% to 1.5%; and
- For all other future heads of damage, including cost of future care and associated tax gross-ups (taxes, management fees), the rate has changed from 3.5% to 2.0%.
As Doug Hildebrand1 explains: “The impact of the new discount rates is a function of length of time. The impact is obviously minor if for a very short period, say five years. The impact is very significant for a very long period, say 50 years”.
Mr. Hildebrand provides the following example table (estimating the % increase in $1,000 per year using the attached factors):
| Earnings | Five Years | 50 years |
| 2.5% multipliers | $4,647 | $28,577 |
| 1.5% multipliers | $4,783 | $35,310 |
| Percentage increase | 2.9% | 23.6% |
| Future Cost of Care | ||
| 3.5% multipliers | $4,516 | $23,606 |
| 2.0% multipliers | $4,714 | $31,424 |
| Percentage increase | 4.4% | 33.1% |
Mr. Hildebrand explains further that the new discount rates may affect gross-ups for income taxes on future care, and fund management fees on future awards. The result may be renewed interest in structured settlements since they substantially eliminate gross-ups and the rate-of return will now be similar.
This paper was written by Sandra Kovacs, former lawyer at Whitelaw Twining.
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1 Douglas Hildebrand, BA (Economics), MBA is President of Columbia Pacific Consulting, with over 25 years experience in economic consulting. Doug directs all firm activities, provides expert testimony, and also practices as a commercial mediator.