Damages Act 1996

5 Meaning of structured settlement

(1) In section 4 above a “structured settlement” means an agreement settling a claim or action for damages for personal injury on terms whereby—

(a) the damages are to consist wholly or partly of periodical payments; and

(b) the person to whom the payments are to be made is to receive them as the annuitant under one or more annuities purchased for him by the person against whom the claim or action is brought or, if he is insured against the claim, by his insurer.

(2) The periodical payments may be for the life of the claimant, for a specified period or of a specified number or minimum number or include payments of more than one of those descriptions.

(3) The amounts of the periodical payments (which need not be at a uniform rate or payable at uniform intervals) may be—

(a) specified in the agreement, with or without provision for increases of specified amounts or percentages; or

(b) subject to adjustment in a specified manner so as to preserve their real value; or

(c) partly specified as mentioned in paragraph (a) above and partly subject to adjustment as mentioned in paragraph (b) above.

(4) The annuity or annuities must be such as to provide the annuitant with sums which as to amount and time of payment correspond to the periodical payments described in the agreement.

(5) Payments in respect of the annuity or annuities may be received on behalf of the annuitant by another person or received and held on trust for his benefit under a trust of which he is, during his lifetime, the sole beneficiary.

(6) The Lord Chancellor may by an order made by statutory instrument provide that there shall for the purposes of this section be treated as an insurer any body specified in the order, being a body which, though not an insurer, appears to him to fulfil corresponding functions in relation to damages for personal injury claimed or awarded against persons of any class or description, and the reference in subsection (1)(b) above to a person being insured against the claim and his insurer shall be construed accordingly.

(7) In the application of subsection (6) above to Scotland for the reference to the Lord Chancellor there shall be substituted a reference to the Secretary of State.

(8) Where—

(a) an agreement is made settling a claim or action for damages for personal injury on terms whereby the damages are to consist wholly or partly of periodical payments;

(b) the person against whom the claim or action is brought (or, if he is insured against the claim, his insurer) purchases one or more annuities; and

(c) a subsequent agreement is made under which the annuity is, or the annuities are, assigned in favour of the person entitled to the payments (so as to secure that from a future date he receives the payments as the annuitant under the annuity or annuities),

then, for the purposes of section 4 above, the agreement settling the claim or action shall be treated as a structured settlement and any such annuity assigned in favour of that person shall be treated as an annuity purchased for him pursuant to the settlement.

(9) Subsections (2) to (7) above shall apply to an agreement to which subsection (8) above applies as they apply to a structured settlement as defined in subsection (1) above (the reference in subsection (6) to subsection (1)(b) being read as a reference to subsection (8)(b)).