A guide to periodical payments

The aim of any compensation award is generally to put a person back in the position they would have been in were it not for their accident or injury – so far as that is possible. With any catastrophic injury, such as spinal cord or brain injury, it is important to make sure that the individual has sufficient funds to source the care and support that they will need in the future.

Making sure that there is a provision that an injured client’s needs are met is the first essential consideration. Then the issue becomes one of ensuring that sufficient funds remain available to meet that individual’s needs over the long term, for the rest of their life. This is where periodical payments can play a critical role, providing ongoing financial stability and peace of mind for clients of serious injury. In some cases, the Court may issue periodical payment orders to ensure damages are structured to meet long-term care and support requirements.

What we’ll cover in this guide:

• Why your compensation needs to provide lifelong financial security after a serious injury
• The potential risks of accepting a single lump sum payment
• What periodical payments are and how they work in practice
• When periodical payments may be more suitable for you and your family
• How the Court decides whether periodical payments orders are appropriate
• The practical and financial benefits of index-linked, tax-free annual payments
• The difference between interim payments and periodical payments
• How specialist legal advice can help you stabilise your future

In our experience, many families initially feel reassured by the idea of receiving a large lump sum, particularly after what may have been a long and turbulent claims process. For many seriously injured clients, the stability of periodical payments provides reassurance not just for today, but for the long term.

• Periodical payments remove the pressure of making a lump sum last for decades.
• A guaranteed, index-linked income protects against rising care costs and inflation.
• Regular and predicable payments reduce exposure to investment risk and financial uncertainty.
• Structured increases can reflect changing or deteriorating care needs over time.
• Financial certainty allows families to focus on rehabilitation, independence, and quality of life.

As reflected in our Recover. Rebuild. Thrive approach to claims, our focus is on supporting clients to recover now, maintain independence tomorrow, and plan for a future they can live well. Structured periodical payments provide the financial stability needed to rebuild life after serious injury, covering ongoing care, rehabilitation, and long-term support. Giving our clients the confidence and means to thrive, pursue independence, and focus on the future they want and deserve.

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. In the past, that was also true of any award made in a catastrophic injury case. 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 their condition deteriorated or the range of care required expanded with age (as is often the case with serious brain injury for example) the concern was that a lump sum might not cover any inflation in future care costs.

Chris McKinney, Partner in Personal Injury, comments:

“Lump sum awards can seem straightforward, but in catastrophic injury cases they carry real risks. Managing large funds over many decades can be challenging, particularly for those unfamiliar with investment and long-term financial planning. In certain situations, periodical payments are often a safer alternative, providing predictable, long-term financial security and peace of mind for both the injured person and their family.”

What are 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. It is important that expert advice is obtained on the advisability or otherwise of a lump sum payment or a periodic payment order.

If the parties’ agree and the individual is happy to settle their claim in this way, an application will be made to the Court. After considering the evidence and the parties’ wishes, the Court may issue a periodic payment order. This ensures 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 annual payments, known as periodical payments, to the injured person for the rest of their life.

Providing certainty for the injured client

Periodical payments orders are paid by the other party’s insurance company against whom the claim is brought. Periodical payments provide certainty for the future. Your legal team will do the work to identify the level of compensation that will be required to ensure, if appropriate, that the periodical payments adequately meet your needs.

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.

Chris McKinney – Partner in Personal Injury, gives his views on how periodical payments can give clients certainty:

“Having secured numerous high-value settlements in areas such as severe brain, spinal and amputation injuries, I have seen how careful structuring of compensation, including the use of periodical payments, can make a tangible difference in a client’s quality of life and long-term care planning. In cases like these, there can be a large amount of money to manage over decades. Periodical payments remove much of that uncertainty, ensuring clients can focus on recovery and daily living, rather than financial risk.”

Practical and financial advantages of a periodical payment

Periodical payments are usually paid annually. They 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 any additional or more intensive care that may be needed over time.

The amount payable can be varied every year in line with the Retail Prices Index (RPI) and in most cases the Court will also link any payments to the Annual Survey of Hours and Earnings (ASHE). The payments may also change at normal retirement age to reflect the reduced income that would have been received. 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.

Key advantages at a glance:

• Predictable annual income

• Index-linked to inflation

• Usually tax-free

• Can increase with care needs

• Adjustable yearly (RPI/ASHE)

• Updated at retirement age

• Increased support for young clients as parental help reduces

What are interim payments?

Periodical payments should not be confused with interim payments. 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 such as brain and spinal cord injury compensation claims. We can ensure that you receive the necessary expert advice in handling your claim and managing any compensation you may be awarded.