Deposit Protection Scheme SCANDAL

Gutsy_Fungus

I have vacated my rental property after 7.5yrs.

My deposit of £595 pounds. This was paid into the Govermant DPS scheme.

It was agreed to be refunded in full by agent and Landlord.

After 7.5 years the DPS have repaid interest on £595 amounting to just £6.32 !!!!!

(just 1% interest return in 2023 on it's own, never mind the whole 7.5 yrs)!!!!!

I called them and they said this is correct, they said interest was only introduced since 2023. There was no interest in the DPS before that.

By my very modest ability in being able to calculate interest. from just 2023 when we are at circa 5%, I should be owed a lot lot more.

Surely this CANNOT be correct and instead whomever is managing the DPS is earning fortunes investing behind the scenes?

I am looking at Computershare Investor Services Plc here.

They say that they hold over 1.8M deposits (as of 2022; their press release).

At an average (for example) of £1000 / deposit and an average return of say 5% less my 1% (2023 interest) makes a net return for the DPS of 4%...

That puts their profits at £72,000,000 per annum.

Can someone do a sense check on this please?

Why am I funding a corporations profits to such an extent!!!!???

What to do?

How to complain?

And based upon my numbers if they are correct this is scandalous!

D

TheSpectator

A quick Google would suggest the rate of interest is 0.73%.

It's highly unlikely they will be getting 5% on the deposits they hold.

tacpot12

You are funding corporate profit like this because it offsets the cost of operating the service. If they didn't keep some of the interest your money earned they would have to charge you more so it becomes a zero-sum game. 

Paying some interest is, I believe, necessary to ensure that deposits retain their value, so that tenants can continue to afford to rent. The rate of interest that should be paid is therefore something close to CPI, which has been about 4% over the last 7.5 years. To my mind it would be relatively easy for the Deposit Protection Schemes calculated what CPI was over the time that they had held the money, but it would be very difficult for the Deposit Protection Scheme to manage their laibilities as they have no control over what CPI is. They would need to hedge against excessive movements in CPI, and this would also increase costs. However, it is not a bad solution to push for, but the only way a change will come about is if Parliament requires it, so your MP is the best person to help acheive this. 

£595 over 7.5 years at 1% interest per year would be a total of £46.10. 
At the average CPI over that time (4%), it would be £203.
And at 5% it would be £262.

km1500

don't forget to put the £6.42 interest on your tax return

Gutsy_Fungus

TheSpectator said:

A quick Google would suggest the rate of interest is 0.73%.

It's highly unlikely they will be getting 5% on the deposits they hold.

My example of 2023 where the base rte is 5%.... Sorry but my argument holds fast

Gutsy_Fungus

tacpot12 said:

You are funding corporate profit like this because it offsets the cost of operating the service. If they didn't keep some of the interest your money earned they would have to charge you more so it becomes a zero-sum game. 

Paying some interest is, I believe, necessary to ensure that deposits retain their value, so that tenants can continue to afford to rent. The rate of interest that should be paid is therefore something close to CPI, which has been about 4% over the last 7.5 years. To my mind it would be relatively easy for the Deposit Protection Schemes calculated what CPI was over the time that they had held the money, but it would be very difficult for the Deposit Protection Scheme to manage their laibilities as they have no control over what CPI is. They would need to hedge against excessive movements in CPI, and this would also increase costs. However, it is not a bad solution to push for, but the only way a change will come about is if Parliament requires it, so your MP is the best person to help acheive this. 

£595 over 7.5 years at 1% interest per year would be a total of £46.10. 
At the average CPI over that time (4%), it would be £203.
And at 5% it would be £262.

Well reasoned argument here.

I have absolutely NO PROBLEM that the funds pays for itself...

But whichever numbers I run...My return of £6.42 is totally shocking when compared to your numbers and/or even comparison against base rate numbers.

TheSpectator

Gutsy_Fungus said:

tacpot12 said:

You are funding corporate profit like this because it offsets the cost of operating the service. If they didn't keep some of the interest your money earned they would have to charge you more so it becomes a zero-sum game. 

Paying some interest is, I believe, necessary to ensure that deposits retain their value, so that tenants can continue to afford to rent. The rate of interest that should be paid is therefore something close to CPI, which has been about 4% over the last 7.5 years. To my mind it would be relatively easy for the Deposit Protection Schemes calculated what CPI was over the time that they had held the money, but it would be very difficult for the Deposit Protection Scheme to manage their laibilities as they have no control over what CPI is. They would need to hedge against excessive movements in CPI, and this would also increase costs. However, it is not a bad solution to push for, but the only way a change will come about is if Parliament requires it, so your MP is the best person to help acheive this. 

£595 over 7.5 years at 1% interest per year would be a total of £46.10. 
At the average CPI over that time (4%), it would be £203.
And at 5% it would be £262.

Well reasoned argument here.

I have absolutely NO PROBLEM that the funds pays for itself...

But whichever numbers I run...My return of £6.42 is totally shocking when compared to your numbers and/or even comparison against base rate numbers.

What has the base rate got to do with it, if you think a business account is earning 5% on it's cash at bank you are seriously mistaken.

Gutsy_Fungus

TheSpectator said:

Gutsy_Fungus said:

tacpot12 said:

You are funding corporate profit like this because it offsets the cost of operating the service. If they didn't keep some of the interest your money earned they would have to charge you more so it becomes a zero-sum game. 

Paying some interest is, I believe, necessary to ensure that deposits retain their value, so that tenants can continue to afford to rent. The rate of interest that should be paid is therefore something close to CPI, which has been about 4% over the last 7.5 years. To my mind it would be relatively easy for the Deposit Protection Schemes calculated what CPI was over the time that they had held the money, but it would be very difficult for the Deposit Protection Scheme to manage their laibilities as they have no control over what CPI is. They would need to hedge against excessive movements in CPI, and this would also increase costs. However, it is not a bad solution to push for, but the only way a change will come about is if Parliament requires it, so your MP is the best person to help acheive this. 

£595 over 7.5 years at 1% interest per year would be a total of £46.10. 
At the average CPI over that time (4%), it would be £203.
And at 5% it would be £262.

Well reasoned argument here.

I have absolutely NO PROBLEM that the funds pays for itself...

But whichever numbers I run...My return of £6.42 is totally shocking when compared to your numbers and/or even comparison against base rate numbers.

What has the base rate got to do with it, if you think a business account is earning 5% on it's cash at bank you are seriously mistaken.

You are missing the point I am trying to make here by a wise margin. Apologies if you aren't seeing it.

:-(

DullGreyGuy

You know that when the DPS is the custodian of the money there is no fee for you or the landlord? How do you think they pay their staff? Buy their IT etc? 

Many deposits arent actually held by the DPS but by the landlord or agent and they purchase insurance from the DPS instead. In those cases operational expenses are covered by the fee paid by the landlord and the entity holding the money gets any interest it accrues. 

dinosaur66

DullGreyGuy said:

You know that when the DPS is the custodian of the money there is no fee for you or the landlord? How do you think they pay their staff? Buy their IT etc? 

Many deposits arent actually held by the DPS but by the landlord or agent and they purchase insurance from the DPS instead. In those cases operational expenses are covered by the fee paid by the landlord and the entity holding the money gets any interest it accrues. 

i never new that about insurance / i thought as a professional landlord i always have to register the with the DPS any new tennancy and the deposit goes straight to the DPS and then they email you/text you and in my case always phone me and they also text/phone the tennant once deposited- i manage my own propertys that are local and letting agents for those out of my area and all have DPS full deposits .

dinosaur66

also makes sense what dullgreyguy said

its a free service and the DPS has costs

they i have been told can be used for landlord / tennant disputes

and they ask landlords can we quote for landlord insurance so maybe a few sidelines to make it viable

i have found that when you tell tennants their deposit is being held by a free govt scheme and they will call you or text you to confirm this they are reassured.