PM Law: Fund has sufficient reserves
The SRA Compensation Fund is to pay out £30m to clients of collapsed Sheffield-based PM Law, it has emerged.
This is one of the key factors behind the Solicitors Regulation Authority’s (SRA) drastic proposed increase in contributions to the fund in the next practising year.
The SRA is looking to raise £46.3m for 2026-27, a £20.3m (78%) increase from the current year.
It announced last month that it wanted to change the longstanding equal demand on individuals and firms to individuals paying 70% of the requirement.
Subject to Legal Services Board (LSB) approval, individuals’ contributions will go up 143% from £70 to £170 and firms’ contributions just 11%, from £1,950 to £2,170. Under a 50:50 split, these figures would have been £120 and £3,600 respectively.
In the application to the LSB, the SRA said this would “rebalance” the split of fees to reflect the increase in individuals and reduction in firms since the current 50:50 approach was established in 2010.
“While we do not have a clear picture of all the equality impacts that may be created by moving to a 70:30 split, especially about those individuals who pay their own contributions, we think that this change is justified as it marks a positive change that will help mitigate known disproportionate impacts on smaller firms.”
The SRA said that the unexpected closure of PM Law in February has contributed to “a significant increase in applications to the fund, with the value of applications expected to reach £30m”.
A month after the closure, the regulator said it had already paid out £9.3m to clients, made up of £5.6m from the statutory trust – which is how the SRA holds money that was in the firm’s client account at the time of intervention – and £3.7m from the compensation fund.
By April, it was up to £16m, made up of £9.3m from the fund and £6.8m from the statutory trust, and the SRA was saying nearly £40m of client money appeared to be missing in total.
The LSB application said there has also been an increase in the number of interventions and the costs associated with administering them, such as storage costs. In the eight months from November 2025 to June 2026, the SRA carried out 45 interventions, compared to 42 for the whole of the previous financial year.
“While the reserves policy of the fund is designed to respond to events of this kind, the scale and nature of these claims has necessitated an increase in contributions. This will ensure the fund remains able to meet its future obligations in terms of known and expected claims.
We reported last month that the collapse of Axiom Ince was set to cost the fund £39m in total, most of which have now been paid.
The application explained the SRA’s policy was to exclude “exceptionally large” interventions like Axiom Ince from its modelling and forecasting for the fund, and that this would not change despite PM Law.
“We undertake detailed cashflow modelling that combines case by case forecasts for known claims with long-term averages derived from six years of historical data, ensuring that projections reflect typical operational experience rather than anomalous events.
“We are also still seeking recovery of costs in the case of the Axiom Ince intervention therefore we would not characterise it as an unrecoverable intervention. We acknowledge that any recoveries may take several years and will therefore impact future contribution levels if received.”
The PM Law intervention showed that the fund “held a sufficient contingency reserve, ensuring demand on claims can be met, despite the scale of claims generated”.
To reintroduce the costs of Axiom Ince that were previously excluded would increase contributions by another £20m or more.
The SRA added that, despite the problems it has identified with high-volume consumer claims, they were unlikely to impact the fund significantly
“The fund only pays grants in situations where there has been dishonesty or a failure to account for monies held by a firm and there is no other avenue for recovery. We do not anticipate significant claims on the fund for these issues but continue to keep the situation closely under review.”
“Transformative” change to the fund – such as basing contributions on the risk or impact profile of each firm – has been put on hold given the SRA’s other priorities and the amount of work it would require.
“Given competing, more pressing, priorities, we are not expecting to look at this over the next year either,” it said.
With the sharp increasing in practising fees as well, the Law Society and SRA are set to collect a total of £224m from solicitors for the next practising year from November, £50m more than the current year.
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