Compensation Fund levy: serious concerns about proposed rise
The Solicitors Regulation Authority’s (SRA) consultation sets out that proposed individual contributions to the fund will rise from £30 in 2023-2024 to £90 in 2024/25.
For firms, proposed contributions will rise from £660 to £2,220.
Our view
“The substantial proposed increase in the Compensation Fund contribution this year – 200% for individuals and 236% for firms – is deeply concerning,” said Law Society chief executive Ian Jeffery.
“Solicitors are steadfast in their wide support for the Compensation Fund, as a vital protection for clients, and it clearly delineates the profession from unregulated providers of legal services.
“However, we have to question whether the SRA has provided sufficient evidence to justify the increases.
“Its own principles call for transparency in determining the viability of the fund whilst keeping the levy amount and the approach to collection manageable for the regulated sector.
“We expect that when the SRA applies for the Legal Services Board (LSB) to approve the levy, their application will include concrete evidence explaining the rationale for the huge increase to be collected in a single year.
“We are aware that there have been a number of recent failures that have placed considerable strain on the resources of the Compensation Fund – most notably the collapse of Axiom Ince – so we see the need to rebuild the fund’s reserves over time.
“However, we also want to understand what measures the SRA is putting in place to minimise the risk of the rising number of calls on the fund.”
About the Compensation Fund
The Compensation Fund is a discretionary fund operated by the SRA. Solicitors contribute to the fund through a levy added to the practising certificate (PC) fee.
The fund provides compensation to people who are owed money by a regulated law firm. It helps:
- provide a safety net for risks that professional indemnity insurance (PII) is unable to cover
- people who have suffered loss due to a solicitor’s personal dishonesty
- people who have experienced hardship due to a solicitor's failure to account for money they’ve received
- reinforce the public’s trust in the legal profession
Find out more about the Compensation Fund, the levy and how it's apportioned