The Legal Services Board (LSB) has sanctioned a significant rise in contributions to the Compensation Fund.
- Solicitors’ contributions will rise from £30 to £90, with law firms seeing an increase from £660 to £2,220.
- This increase addresses fund depletion due to high-profile interventions, including Axiom Ince.
- The SRA ensures access to at least £33.4m this year, though reserves fall short by £6.2m.
- The Law Society supports transparency and accountability in compensation fund management.
The Legal Services Board (LSB) has approved a substantial increase in contributions solicitors and firms are required to make to the Compensation Fund. The contributions for individual solicitors will rise from £30 to £90, while law firms that hold client funds will see an increase from £660 to £2,220.
This significant rise aims to address the depletion of the fund caused by large interventions, such as those involving Metamorph Law and Axiom Ince. The Solicitors Regulation Authority (SRA) predicts it will need to disburse over £35 million in claims related to Axiom Ince, of which £10 million has already been paid by mid-2024, with ongoing claims exceeding £1 million monthly.
Despite this hike, the total accessible fund in the 2024/25 practising year will be £33.4 million, which is £6.2 million less than the SRA’s minimum reserve estimate. To meet the reserve, contributions would need to surge to approximately £140 per individual and £3,460 per firm. The SRA is managing cash flows with heightened scrutiny, considering an exceptional mid-year profession levy if required.
In addition, the SRA has secured a £10 million banking facility to bolster the fund if necessary. Amongst several issues, the LSB expects the SRA to review and potentially revise its methodology for calculating future contributions, to steer clear of debt reliance.
Law Society chief executive, Ian Jeffery, attributes the increased funds request to the collapse of Axiom Ince and resultant compensation costs. Jeffery highlights the solicitors’ unwavering support for the fund, emphasising its role in safeguarding clients and distinguishing the profession from unregulated service providers.
The LSB’s decision reflects a strategic move to stabilise the Compensation Fund amid rising claims, ensuring continued client protection.
