1. Purpose and Scope
This policy sets out how Stephensons Solicitors LLP accounts for and pays interest on client monies held in client accounts in accordance with Rule 7 of the Solicitors Accounts Rules. It applies to all partners, fee earners, compliance staff and support staff involved in the receipt, holding, transfer or payment of client funds. It covers general client accounts and any designated client accounts maintained by the firm.
2. Regulatory Framework and Principles
The firm will:
- Hold client money in client accounts in accordance with the Solicitors Accounts Rules.
- Account to clients for a fair sum of interest on client money held, where it is fair and reasonable to do so, having regard to the amount held and the period for which it is held.
- Treat clients fairly and consistently across all matters, subject to matter-specific instructions or client agreements.
This policy is to be read with the firm’s Terms of Business, and engagement letters.
3. Definitions
Client money means money held or received by the firm for or on behalf of a client, including money held as stakeholder or in respect of regulated activities as defined by the Solicitors Accounts Rules.
General client account means an account to hold client money other than a separate designated client account.
Separate designated client account means an account opened specifically for an individual client or matter, in the name of the firm but designated to that client.
Interest means simple interest calculated on cleared client balances in accordance with this policy.
4. Entitlement to Interest
The firm will pay a fair sum of interest to the client on money held in a general client account where the money is held for a period and in an amount that would, having regard to current interest rates and administrative costs, justify the payment of interest.
Where funds are held in a separate designated client account, all interest earned on that account will be credited to the client, subject to any agreement with the client to the contrary that is permissible under the rules.
Unless otherwise agreed in writing, interest will be paid to the client and not to any third party.
5. Calculation of Interest
Interest is calculated on the following basis:
- Basis of calculation: Simple interest on the daily cleared balance, using the firm’s reference rate.
- Reference rate: We are required by the Solicitors Regulation Authority (SRA) to deposit monies in instant access accounts only. This means that the interest rate paid on monies in our general account may not be as high as the recipient can achieve by placing the money on deposit themselves.
The firm will adopt a reference rate linked to the published interest rates for the standard client deposit account of its primary client bank. Our current reference rate is 0.65%.
We will review the reference rate at the end of our financial year and / or when our bank reviews their interest rates.
- Cleared funds: Interest accrues from the date funds are treated as cleared by the firm’s client bank, which is typically 5 working days after deposit for cheques and on the value date for electronic receipts.
- Tax: Interest will be paid without deduction of tax. Clients are responsible for accounting for any tax due on interest received. It is your responsibility to notify HMRC of any interest received and to calculate and make payment of any tax due as a result. We will not notify HMRC or pay any tax due on your behalf.
It may be that the cost of dealing with interest payable outweighs the sum due. If you do not wish to receive interest, then you may opt-out by informing this firm’s Compliance Officer for Finance and Administration by email at dba@stephensons.co.uk and noting your matter reference number.
- Following review of the reference rate this firm may update this policy where necessary.
6. Period of Accrual
Interest will accrue:
- From the date of clearance of funds into the relevant client account.
- Up until and including the day before the payment out to or on behalf of the client.
Where funds are transferred between client accounts within the firm, the accrual continues without interruption based on the cleared value date.
7. De Minimis and Administrative Thresholds
To ensure a fair and proportionate outcome, the firm applies a de minimis threshold for payments of interest arising from funds held in the general client account. If the amount of interest calculated for a client on a matter is less than £150, no interest will be paid as it would be disproportionate to calculate and pay such amounts having regard to the administrative cost and current rates.
The de minimis threshold will be reviewed at least annually, taking into account prevailing interest rates and operational costs.
This threshold does not apply to separate designated client accounts, where all interest earned is credited to the client.
8. Separate Designated Client Accounts
The firm may open a separate designated client account where:
- A client acting reasonably requests it in writing; or
- It determines it is in the client’s best interests due to the amount and duration of the funds to be held; or
- The retainer or transaction requires it.
All bank interest earned on a separate designated client account will be credited to the client (net of any bank charges that relate specifically to that account). Any bank charges specific to that account will be borne by the client.
9. Circumstances in Which Interest Is Not Payable
No interest will be paid:
- On money held for payment of professional disbursements once counsel, experts or other suppliers have requested payment and funds are being held pending invoice settlement within a short, reasonable period.
- On money held on account of unpaid fees where the client has been notified of the bill and the firm is entitled to transfer funds in settlement.
- Where the amount of interest calculated would be less than the de minimis threshold in section 7.
- Where the client has agreed in writing that no interest is payable in return for agreed benefits or fee arrangements, to the extent permitted by the rules.
- On funds subject to a third-party direction, statutory trust or court order that precludes payment of interest to the client.
- Where the bank does not pay interest on the relevant balance or period (for example, on same-day value where no interest accrues).
10. Client Agreements and Disclosure
The firm’s Terms of Business and engagement letters will explain:
- The firm’s approach to paying a fair sum of interest.
- The de minimis threshold and reference rate methodology.
- When a separate designated client account may be opened and how interest and bank charges will be treated.
Any client-specific variations will be agreed in writing, provided they remain consistent with the Solicitors Accounts Rules.
11. Method and Timing of Payment
Interest payable will ordinarily be calculated and paid:
- At the conclusion of the matter; or
- on payment out of funds to or on behalf of the client.
Interest will be paid by transfer from the firm’s office account to the client, with a corresponding entry recorded in the client ledger and narrative identifying the period and basis of calculation. Alternatively, where permitted and agreed, interest may be set off against the firm’s fees or paid directly from a separate designated client account.
12. Record-Keeping and Audit
The firm will maintain records sufficient to show:
- The dates funds were received and cleared.
- Daily balances on which interest was calculated.
- The rate(s) applied and the calculation method.
- The amount of interest paid.
These records will be retained for at least 12 months and will be available for inspection as part of internal audits and external reviews.
13. Roles and Responsibilities
The Compliance Officer for Finance and Administration (COFA) is responsible for overseeing implementation, monitoring compliance, reviewing the reference rate and thresholds, and approving client-specific departures where appropriate.
Matter partners are responsible for ensuring clients are informed of this policy and for identifying when a separate designated client account may be appropriate.
Accounts staff are responsible for accurate calculation, posting and payment of interest in accordance with this policy.
14. Bank Selection and Interest Environment
The firm selects client banks based on stability, service and the safeguarding of client money. Client accounts are typically instant access pooled accounts and may earn lower rates than retail savings products. The firm’s reference rate methodology reflects this and aims to produce a fair outcome rather than to match market-leading retail rates.
15. Complaints
Clients who are dissatisfied with the interest paid may raise the issue with the matter partner or the COFA. Complaints will be handled under the firm’s complaints procedure. If unresolved, clients may have recourse to the Legal Ombudsman, subject to its rules.
16. Review and Updates
This policy will be reviewed at least annually, and sooner if there are material changes to interest rates, banking arrangements, or the Solicitors Accounts Rules. Any amendments will be approved by the COFA and communicated firm-wide.
17. Effective Date
This policy takes effect in relation to interest payments due from 01/03/2026 and applies to all client monies held on and after that date.
18. Queries
Any queries about this policy should be directed to the COFA at dba@stephensons.co.uk.