# Calculating with Ogden

**With a series of worked examples, Simon Levene guides beginners through the calculations in personal injury claims under the contentious new discount rate**

On 27 February 2017 the Ministry of Justice announced a reduction of the discount rate from 2.50% to -0.75% with effect from 20 March 2017.

The implications of this change for the calculation of future losses in personal injury claims are enormous, because it greatly increased the value of such claims. This article guides beginners through the main sorts of calculations that they will come across in personal injury claims. The current edition of the Ogden Tables does not contain the figures discounted by -0.75%; these can be found here and in the 2017/18 edition of* Facts & Figures*, published on 31 August 2017.

#### Losses for life where the life expectation is normal

- Tables 1 and 2 deal with losses for life. Table 1 is for men, and Table 2 is for women.
- To start with the simplest example, let us take the case of a woman aged 55 who will need to buy batteries for a hearing aid for the rest of her life. These batteries will cost £50 a year. Her life expectation is normal.
- According to Ogden Table 2, using the -0.75% column, the multiplier for life for a 55-year-old woman is 38.99.
- So her claim is for [38.99 × £50] = £1,949.

#### Losses for life where the life expectation is slightly reduced

- Here, the same claimant suffers from a medical condition which will reduce her life expectation by four years.
- She is now 55. If we add four years to her present life expectation, and treat her as a 59-year-old, Ogden Table 2 will give us a multiplier of 33.92.
- So her claim is for [33.92 × £50] = £1,696.

#### Losses for life where the life expectation is significantly reduced

- Here, the medical evidence is that the same female claimant suffers from a condition that has reduced her life expectation to 12 years. In such a case, where the doctors have agreed an actual life expectation for the claimant, do not use Tables 1 or 2, because these are based on general life expectations.
- Use Table 28; this is the table to use when calculating losses over a known period.
- Table 28 gives a multiplier of 12.559 for a 12-year period of loss, so the claim is for [12.559 × £50] = £628.

#### To find a person’s life expectation

To find a claimant’s life expectation, where there is no reason to think it might be shorter than the average, use Ogden Table 1 for men, and Table 2 for women. The figure that you see in the 0% column is the life expectation. (In fact, the Tables are based on slightly out-of-date life data, so the multipliers are a little low, but for the purpose of this article we will treat them as correct.) So:

- The life expectation of a man aged 23 is 63.94.
- The life expectation of a woman aged 23 is 67.67.

#### Claims for loss of earnings – generally

There are 12 Ogden Tables for use in calculating future loss of earnings: Tables 3-14. These are for calculating loss of earnings to men’s and women’s retirement ages of 50, 55, 60, 65, 70 and 75. (If you need to calculate to different retirement ages – eg 66, 67, 68 or 69 – you will find these in Table A2 of ‘Facts & Figures – Tables for the Calculation of Damages’. The 2017/18 edition, which will be published shortly, will contain the -0.75% figures.)

To calculate future loss of earnings you will need to know the following about the claimant:

- age
- sex
- whether disabled before the accident
- whether now disabled
- level of educational attainment
- whether in work at the time of the accident
- whether in work at the date of the Schedule
- retirement age had s/he not been injured
- retirement age now
- pre-accident earning capacity
- post-accident earning capacity

‘Disabled’, ‘employed’ and ‘not employed’, and the various levels of educational attainment, are defined in para 35 of the Introductory Notes to the Ogden Tables. The first seven factors give an indication of how much time the claimant would have spent in work if he had not been injured. If someone is currently in work, for example, he is likely on average to spend more of his future working years in work; if someone has a degree, he is likely to spend more time in work than someone with only two GCSEs; the able-bodied tend to spend more time in work than the disabled. These ‘reduction factors’ are brought together in Ogden Tables A-D. For example:

- [Table A] A 40-year-old man with A-levels, who is able-bodied and in work, has a reduction factor of 0.88; this means he is likely to spend 88% of his working life actually in work.
- [Table B] A 40-year-old man who is disabled, has a degree, and is out of work, has a reduction factor of 0.26.
- [Table C] A 35-year-old woman with A-levels, who is able-bodied and in work, has a reduction factor of 0.86.
- [Table D] A 35-year-old woman with a degree, who is disabled and out of work has a reduction factor of 0.42.

It is important to note that these are only average figures; it may be necessary to adjust them to take into account a claimant’s particular circumstances. Someone who has reached the age of 50 without ever doing a day’s work, for example, is likely to have a reduction factor of 0.00. Loss of three toes might be a disastrous injury for a footballer; it would probably not be so for a dermatologist.

#### Loss of earnings where the claimant will never work again

- The claimant is female, aged 47, and has no educational qualifications. She was earning £16,750 a year net before the accident, and would have worked to the age of 65. At the time of the accident she was not disabled, but she has been so severely disabled by the accident that she will never work again.
- Ogden Table 10 gives us the basic multiplier, which is 18.80.
- Then look at Ogden Table C: this gives us an adjustment factor of 0.81.
- But for the accident, the claimant would therefore have earned [18.80 × 0.81 × £16,750] = £255,069. As she now has a nil earning capacity, this is her claim.

#### Loss of earnings where the claimant can still work

- The claimant is male, aged 38, and has three A-levels but no degree. Before the accident he was able-bodied and he was earning £24,600 net. As a result of his injuries, he is disabled. Currently he is out of work, but when he finds work, he can only expect to earn £8,930 net. He would have worked to 70; he will now have to retire at 65.
- The multiplier to age 70 (Ogden Table 11) is 34.39. When he was able-bodied his adjustment factor was 0.90 (Table A). This means that if he had not been injured he would have expected to earn [34.39 × 0.90 × £24,600] = £761,395.
- The multiplier to age 65 is 28.88. Now that he is disabled, the adjustment factor (Table B) is 0.28. His residual earning capacity is therefore [28.88 × 0.28 × 8,930] = £72,212.
- Subtracting what he will now earn from what he would have earned gives [£761,395 – £72,212] = £689,183, which is his claim for loss of earnings.

#### Loss of pension

The main difficulty in assessing a pension claim is establishing the annual loss, rather than the multipliers. The multipliers are found in Ogden Tables 15-26. It is worth bearing in mind that there is a relationship between a claimant’s pension and her earnings; when applying the adjustment factors of Tables A-D to the earnings figures, it may also be appropriate to take them into account when calculating future pension as well. After all, if a claimant had only been expected to spend, say, 82% of her future working life in work, that would presumably have affected her level of pension.

#### When losses do not start immediately

- Ogden Table 27 is used in the case where, for example, a claimant (of any age) will need a hip replacement costing £17,850 in 17 years’ time, or will need to buy a new car for £11,350 in ten years’ time, and another one ten years after that.
- For the hip replacement, Table 27 gives a factor of 1.1365. So the claim is for [1.1365 × £17,850] = £20,287.
- For the cars, the adjustment factor for the first car (in 10 years) is 1.0782, and for the second (in 20 years) is 1.1625. Add the two figures, to get 2.2407. The value of the claim is [2.2407 × £11,350] = £25,432.

#### Losses that will run for a known number of years

- The claimant will need a hip replacement in seven years’ time (known as ‘a term certain’). Until then, however, he will need care costing £7,555 a year.
- Ogden Table 27 tells us that the multiplier for a ‘term certain’ of seven years is 7.188.
- The claim for care is therefore [7.188 × £7,555] = £54,305.

#### Losses that start to run in the future

- Suppose, for example, that when the claimant is 75 she is going to need care that costs £8,429 a year, for the rest of her life. She is now only 50 years old, so this head of loss will start to run in 25 years’ time.
- Ogden Table 2 tells you that the lifetime multiplier for a woman aged 75 is 16.23.
- She is now aged 50, so this period of loss will start in 25 years’ time. Ogden Table 27 gives us a factor of 1.2071 for a loss that will start in 25 years’ time (see example 9 above).
- Her claim for care is therefore [16.23 × 1.2071 × £8,429] = £165,135.

Table A6 in ‘Facts & Figures’ is a quick way of combining Ogden Tables 27 and 28 eg:

- 10 years of loss, starting to run in 6 years = 10.87.
- 17 years of loss, starting to run in 20 years = 21.08.

#### Recurring losses

One is often faced with a claim for numerous aids and appliances, which will need replacement at different intervals eg:

- walking stick costing £14, which will last 4 years.
- perching stool costing £125, which will last 8 years.
- hearing aid costing £1,460, which will last 5 years.

For each such aid, you will need to find the claimant’s life expectation; you will find this in Ogden Table 1 or 2, in the 0% column. Let us say that the claimant will live for another 20 years. She will buy:

- walking stick in years 1, 5, 9, 13 and 17.
- perching stool in years 1, 9 and 17.
- hearing aid in years 1, 6, 11 and 16.

The time-consuming way of doing this is to do a separate calculation for every purchase of each item. Year 1 is the simple full cost, but there are nine further figures to look up in Table 27 – see Example 9 above (the car example) for how this is done.

The simpler way is to use Table A5 in ‘Facts & Figures’; this Table provides you with one combined figure for all the calculations. So, for example, [5.32 × £14] = £74, which is the total cost of buying one £14 walking stick now, and replacements in years 5, 9, 13 and 17.

#### Advanced calculations

This article has set out some of the most common calculations that will be needed when assessing future losses. There are more complicated calculations (eg where it is necessary to split the multipliers because there will be different losses at different times); and claims under the Fatal Accidents Act 1976 have their own pitfalls.

**Contributor Simon Levene is a barrister at 12kbw**