Small firms lose out in SIF contributions

SMALL firms, which already face a massive hike in their Solicitors Indemnity Fund contributions due to risk banding, will have to pay out even more money, according to figures published last week.

The figures, released by the society's deputy vice-president Robert Sayer, show that a new method of calculating firms' contributions will hit smallest firms the hardest.

Up until now SIF has calculated firms' basic contributions by dividing them into seven tranches based on the amount of gross fees they receive.

In April the Law Society's Council voted to put the system on a more commercial footing by introducing a system of tapering whereby firms' contributions are based on their exact contributions.

According to Sayer's calculations, firms with gross fees of £250,000 will pay a basic rate of 9.7 per cent of their contributions to SIF when the system comes in next year.

This represents over three times the average contribution of around 3 per cent. Last year the figures were considerably less. A firm with gross fees of £250,000 contributed under 2.5 times the average.

A spokeswoman for SIF said the new system could not be looked at in isolation and other factors such as the increased discounts and risk banding - under which firms with bad claims record will pay more - should be taken into account.

She said: "We always maintained there would be winners and losers but that doesn't take away from the inherent fairness of the system. A lot of small firms will be better off."