Rapson: Stakeholders understood the need for change
Individuals are set to pay 70% of the contributions to the Compensation Fund this year after a major policy shift by the Solicitors Regulation Authority (SRA).
But the big rise in the cost of practising laid out in its draft business plan issued for consultation in May – a 29%, or £25m, increase in its funding for the 2026-27 practising year – is still set to go ahead.
Practising fees and compensation fund contributions are dealt with separately; the fund pays clients where they have suffered loss due a solicitor’s default.
On the basis of the usual 50/50 split in the latter, the SRA initially proposed that individual contributions would jump 71%, from £70 to £120, with firm contributions up 85% from £1,950 to £3,600.
However, announcing the headline outcome of the consultation, the SRA said one of the main areas of concern raised was the potentially disproportionate impact this would have upon smaller firms.
As a result, and subject to Legal Services Board approval, it is to change the split to 70% from individuals and 30% from firms, meaning individuals will pay £170 (143% increase) and firms £2,170 (11% increase).
The SRA said: “Making this change will mean – if they pay contributions on behalf of solicitors they employ – that firms employing 29 solicitors or fewer (around two-thirds of all firms) will pay less into the compensation fund overall in 2026/27 than they would have done if contributions remained calculated on a 50/50 basis.”
Since the current split was set in 2010, the number of individual solicitors has increased significantly while the number of firms has fallen, but it was only last year that the SRA reported little support for moving to a 70/30 split.
It said today that the move would “help restore the overall balance between what firms and individuals contribute, to a position more aligned with that which existed in 2010”.
More broadly, the SRA said there was “general support for its ambitious programme of improvements for the year ahead”.
Ahead of publishing its final plan later in the summer, the SRA said it was considering where it could make improvements to address issues raised, such as “addressing concerns about transparency by providing more detail and regular updates on progress, providing more information on the impact of its work, and providing evidence that investments are delivering value for money”.
The underlying funding requirement will then be submitted to the Legal Services Board for approval.
Chief executive Sarah Rapson said: “Stakeholders understood the need for change and investment, and there was particularly strong support for the work we outlined to protect consumers and uphold trust in legal services and the profession more generally.
“Not surprisingly we also heard some challenge and concerns, not least the impact of the compensation fund fee increase on smaller firms.
“The board has carefully considered what we can do to address these issues ahead of submitting our final funding requirement to the Legal Services Board for approval.”
Leave a Comment