Page 169 - Pharmacy Appeals 1/4/04 to 31/3/05

NHS Resolution Annual report and accounts 2021/22 145

Sensitivity of total provisions to HM Treasury discount rate (f m)

Provisions All rates reduced by Base All rates increased by
assumptions
1% pa % 1% pa %

Known claims 35,630 3% 34,691 33,816 -3%
Settled PPOs 42,493 44% 29,572 21,450 -27%

IBNR 90,124 40% 64,288 47,730 -26%
Total provisions 168,247 31% 128,551 102,996 -20%

The table above is based on adjusting the nominal Sensitivity to differential
discount rate by +1 % and -1 %. A change in the between ASHE and CPI
nominal interest rate of +1 % would represent
The ASHE index, used in the calculation of damages in
short, medium, long and very long term nominal
PPO cases where care costs are a component, measures
interest rates of 1.47%, 1.70%, 1.95% and 1.66%
the rate of change in the wages of carers. The current
respectively. As a result of the range of the increments
assumption is that the rate of inflation in carers' wages
analysed (and, for example, the long term nominal
is 1.75% higher than CPI price inflation each year.
interest rate of 0.66%), results to the far left of the
table imply a negative nominal discount rate. The table that follows shows the effect on the value
of the CNST provisions where this differential is varied
For the clinical schemes, the changes in discount
and, as the table shows, this is a non-linear relationship.
rates this year have had a materially large impact
An additional +/- 0.5% difference between ASHE and
on the IBNR provisions. This is because a large
CPI will either reduce the provision by 11 % or
proportion (by value) of the provisions are expected
increase it by 13% respectively.
to be paid in more than ten years' time and the long
term discount rates have reduced significantly.

Sensitivity of total provisions to ASHE assumptions (f m)
Provisions All rates reduced by Base All rates increased by
assumptions
0.5% pa % 0.5% pa %
Known claims 30,948 -1 1 % 34,691 39,188 13%

Settled PPOs 25,262 -15% 29,572 34,875 18%
IBNR 58,827 -8 % 64,288 70,684 1 0 %
Total provisions 115,037 -11% 128,551 144,747 13%