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Last edited 15 Aug 2018
Retention held in trust fund
Retention is a percentage (often 5%) of the amount certified as due to a contractor on an interim certificate, that is retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects. For more information, see Retention.
In October 2017, the government published the Pye Tait review which sought to assess the costs and benefits of retentions along with a number of alternative mechanisms for ensuring completion of the works.
One of the suggested alternatives was that retention could be held in a trust fund. This can help guard against the risk of the client’s insolvency, as the retention money would not form part of their assets and so could still be received by the contractor. Control over the fund is passed on to an independent agent.
It had appeared that the industry was not particularly supportive of using retention trusts. In March 2015, a petition on their use closed having attracted fewer than 2,000 signatures.
However, in 2017 and 2018, support for their introduction increased, in particular following the collapse of Carillion.
On 26 April 2017, Alan Brown MP introduced the Construction Industry (Protection of Cash Retentions) Bill, but it did not progress because of the general election.
In January 2018, former charted surveyor Peter Aldous MP introduced The Construction (Retention Deposit Schemes) Bill 2017-19 to Parliament under the Ten Minute Rule.
By April 2018, more than 100 MPs (around 1 in 6 of all MPs) had expressed their support for the 'Aldous Bill', which calls on government to introduce new legislative proposals to place cash retentions in deposit protection schemes. The bill has received signatures from 61 MPs, including the Green co-leader Caroline Lucas, the shadow Chancellor John McDonnell, the Conservative MP Ken Clarke, and the Liberal Democrat leader Vince Cable.
 Related articles on Designing Buildings Wiki
- Construction (Retention Deposit Schemes) Bill 2017-19.
- Construction supply chain payment charter.
- Fair payment practices for construction.
- Performance bond.
- Project bank accounts.
- Pye Tait review.
- Retention bond.
- Right to payment.
- The causes of late payment in construction.
- The problems with retention.
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