Ogden 8 – A reduction in multipliers and other important points to note

The eighth edition of the Ogden Tables was published on Friday 17 July 2020. This latest edition provides a new set of tables, and explanatory notes, to guide and inform the approach to the valuation of lump sum awards for future losses. Unlike in previous additions, there is now a short section of the explanatory notes addressing text dealing with periodical payments.

The main headline change for those dealing with high value claims is a reduction in the level of multipliers as a result of a slowdown in life expectancy improvement compared with the assumptions that were adopted when the seventh edition was produced. A change to those figures was anticipated in BLM’s previous blog in November 2019, a copy of which can be accessed here. 

The updated tables show a modest reduction in raw earnings multipliers of around 0.2%-0.5% for males and 0.1%-0.25% for females. Bearing in mind that those multipliers are then further adjusted by the Table A-D discount factors in any event, the practical effect is negligible. Of more interest for the highest value claims are the whole life multipliers, set out by age in the chart below, which show reductions (depending on age) of around 1%-8% for males and 2%-9% for females.

The percentage difference between Ogden 7 and Ogden 8 has differing effects at differing ages, and between males and females. The greatest effect is around the age of 60-70 in males. For females there are greater reductions with a more steady decline in that reduction over their lifetime, whilst there is a tail off in the reduction for both males and females  in the later years. By way of example:

It is apparent from this example that there are significant reductions to be achieved in light of these new multipliers. That being said, the effect is obviously greatest in those cases involving high multiplicands, usually resulting from costly care packages, and individuals requiring such care packages may well have a reduced life expectancy in any event which will serve to further reduce the effect of these reduced multipliers. What is clear is that life expectancy remains a vital issue to explore in any high value personal injury claim and it is an area where claims should now be (at least slightly) reduced.

Whilst the changes to multipliers stand out, practitioners should not overlook reading the new explanatory notes and noting further changes. BLM will be analysing these changes and the practical effect but for now highlight the following:

  • Disability – Often a key factor in the valuation of a claim for loss of earnings, the definition has been amended to clarify that the claimant must meet the more restrictive definition of disability under the Disability Discrimination Act 1995 (rather than the Equality Act 2010) and the disability must affect either the type or amount of work the claimant can perform.
  • Discount factors (table A-D) – There is further guidance on when and how to depart from using the usual table A-D discount factors within an Ogden calculation, and how that discount factor might be adjusted. It should be noted that the discount factors remain based on research data from 1998-2003 which arguably does not take account of modern economic conditions, and certainly does not anticipate the economic downturn resulting from the Coronavirus pandemic. There is arguably further basis as a result of these factors to challenge the correct application of the discount factors. It should also be noted that the new guidance does not prevent the application of alternative methods of calculating loss of earnings (whether by Smith v Manchester or Blamire awards).
  • Fatal claims – The notes have been updated to reflect the changes to calculation dates in line with the decision of Knauer v Ministry of Justice [2016] UKSC 9.
  • Loss of earnings PPOs – The notes include a new section providing guidance on the application of table A-D discount factors to the indexation of periodical payments for loss of earnings.
  • Retirement age – Having previously only provided multipliers to reflect retirement ages at 5 year intervals from age 50 to 75, the new tables include retirement ages 68 and 80.
  • Additional tables – There are now “Additional Tables” which allow for the calculation of multipliers from any age up to age 125 (i.e. beyond the 100 year age in the regular tables) which include their own explanatory notes. The tables can be used to calculate retirement ages which differ to those included within the standard tables. They can also assist to determine split multipliers where different levels of loss apply to different periods of time. These tables are only published on the Government Actuary Department’s website in Excel format.

The latest version of the tables will continue to provide the backbone to valuing large loss claims. It is important to remember that Ogden is a guide, it is not the law. There is always room for interpretation to be applied to each individual case. The latest version, and particularly the helpful explanatory notes, provide further assistance in this understanding and interpretation.

This article was prepared by Andrew Williamson, Stuart Hardy, Sian Langer, Lindsey Bartling, Alexandra Payne and Alistair Kinley as members of BLM’s Actuarial Group. 

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