SRA reforms compensation fund levy

The Solicitors Regulation Authority today confirmed plans to impose a hefty increase in the compensation fund levy, but is moving to ease the relative burden on smaller firms. 

During its draft 2026-27 business plan consultation, the regulator said one of the main concerns raised was the potentially disproportionate impact that increases in fees or compensation fund contributions would have on smaller firms. It is therefore changing how fund contribution levels are calculated, moving from the present 50/50 split between individual and firm contributions to a 70/30 divide. A 70/30 split was floated by the regulator last year but not pursued. 

Firms employing 29 solicitors or fewer (around two-thirds of the total) will pay less into the compensation fund overall than they would have done had contributions been calculated on a 50/50 basis, the regulator said. In 2026-27 contribution levels are being set at £2,170 for a firm (compared to £3,600 under the 50/50 model); and £170 for an individual solicitor (£120 under the 50/50 model).

Since the current compensation fund arrangements were introduced in 2010, the regulator stressed, there has been a significant increase in the number of solicitors but a fall in the number of SRA-regulated firms. Changing to a 70/30 apportionment will ‘help restore the overall balance between what firms and individuals contribute, to a position more aligned with that which existed in 2010’, it said.

This year’s SRA budget settlement amounts to an unprecedented cash call on the profession. Unveiling its business plan in May, the regulator announced that its budget for 2026-27 must rise by 29% to £111.5m to fund a complete overhaul of the organisation. The highest sum previously levied for the compensation fund was £31.6m in 2024-25 – the year that thousands of claims were made by clients of collapsed firm Axiom Ince.

The total contribution fell to £26m last year, but will soar to £46.3m in 2026-27 after the shutdown of PM Law in February this year. 

Kindly shared by The Law Society Gazette  Image courtesy of Adobe