For Employers
The UK Retention Deposit Scheme is an independent scheme for the protection of retentions under construction contracts.
We provide segregated bank accounts for construction retentions under standard-form and bespoke construction contracts in England and Wales.
For Employers
Using retention deposit account for your construction retentions enhances security, transparency, and administrative efficiency, while reducing risks and promoting timely project completion.
How does the retention protect the Employer?
Find out more about What is a Construction Retention?
The underlying purpose of a construction retention from an Employer's perspective is to ensure the completion and quality of the construction project.
Proper Completion - By withholding a certain amount against each interim payment, the Contractor is given a financial incentive to complete the Works - once they are complete, the Contractor can have its money.
Proper Quality - That's only half the story, though, as only half the retention is generally released at practical completion (or the equivalent under the construction contract). The other half of the retention is generally not released until all of the works have been performed to the required standards and any defects have been remedied. This ensures not only that the Contractor will complete the works, but that the Contractor will do so to a high quality.
Are there any benefits to the Employer for depositing the retention with a third party?
Using a Retention Deposit Account doesn't dilute the Employer protections; in fact, unless the Employer already holds their funds at the Bank of England, the use of a Retention Deposit Account probably protects their funds more - the retention is entirely protected against the underlying credit of any bank, so will definitely be available for payment to the Contractor in line with the Employer's contractual requirements.
As a Negotiating Tool
The use of a Retention Deposit Account is something that is usually agreed to between the parties to a construction contract during its negotiation stages. It may be that the Employer has settled on the scope of the works, identified a preferred Contractor, and is seeking a final round of concessions on pricing, flexibility, programme or similar.
Proposing the use of a Retention Deposit Account can be a useful tool in the Employer's arsenal of options to help encourage a Contractor to adjust the price or programme, or to agree to other contractual terms relating to liabilities for nuisance, existing ground conditions or similar.
While this will often be something that makes very little difference to an Employer, its value to a Contractor cannot be underestimated.
Enhanced Security, Trust & Goodwill
Depositing the retention each month in a Retention Deposit Account ensures that both parties - the Employer and the Contractor - can trust that the funds will be managed impartially and in line with the underlying construction contract terms. This mitigates any risk of unforeseen barriers to payment (be they financial, legal, political or administrative), providing peace of mind to both parties.
Increased Transparency
Retention Deposit Accounts offer clear and accessible records of the retention payments and the balance of retention funds. This transparency helps to avoid disputes and misunderstandings regarding the availability and management of the funds.
Employers benefit from a transparent process that enhances their reputation for fairness and accountability - particularly important if the Employer is a high-profile individual, listed company, B Corporation or simply operates with a highly ethical or socially responsible culture.
Sustained Contractor Incentive
Margins in construction in the United Kingdom are incredibly tight. For many Contractors, the retention payment of 3-5% will constitute a significant part of the profit that the Contractor expects to make on the work.
By reassuring the Contractor that their retention funds are safe, ring-fenced, safeguarded and ready for release in accordance with the contract, Contractors are incentivised to deliver timely and satisfactory project completion, comfortable that their retention release will be swiftly forthcoming.
Reduced Administrative Burden
Managing retention funds internally can be administratively burdensome. Many standard-form contracts require the Employer to open their own separate, segregated bank account and to deposit the retention in there in any event.
Retention Deposit Accounts streamline this process by outsourcing the management to a neutral third party, allowing Employers to focus on their core project activities without the additional responsibility of retention fund management.
Legal & Financial Risk Mitigation
Employers are sometimes unable to pay retentions on time. This could be as a result of a change in financial circumstances, or owing to administrative or political difficulties that prevent them from moving money or making payments.
The use of a Retention Deposit Account ensures that the funds are handled in accordance with the construction contract, potentially avoiding costly dispute resolution, the accruing of interest and any reputational risks of failing to pay retentions to the Contractor, or paying them late.
What does an Employer need to do to open a Retention Deposit Account?
Opening a Retention Deposit Account is both straightforward and quick. Find out more about How It Works, or log in to your account to open a new Retention Deposit Account.
Where can an Employer find more information on Construction Retention Deposit Accounts?
We have lots of resources available to Employers who would like to find out more about Retention Deposit Accounts:
