Guidance

Consumer savings schemes legislation for businesses

Published 18 November 2025

Introduction

This guidance is for traders that operate ‘consumer savings schemes’, such as Christmas savings clubs. It explains the legal duties introduced by the Digital Markets, Competition and Consumers Act (DMCCA) and how businesses can comply.

Local authority trading standards and other enforcers may also find this guidance helpful. Where this guidance states that traders must do something, this refers to a legal obligation under the DMCCA. Where the guidance states that a trader should do something, it is best practice advice.

The government has enacted legislation requiring businesses that operate consumer savings schemes, such as Christmas and similar savings clubs, to safeguard consumer payments. These businesses must now establish trust accounts or secure insurance arrangements to protect these funds in case of insolvency. This requirement fills a significant gap in consumer protection for savings schemes which fall outside the regulated banking and financial services sector.

The legislation also requires businesses to provide clear and accessible information to consumers about how their payments are protected. The aim is to improve transparency and consumer confidence, ensuring participants understand the measures in place to protect their funds.

Scope of consumer saving schemes provisions

The consumer saving schemes (CSS) provisions in the DMCCA apply only to ‘consumer savings scheme contracts’, which are contracts between a consumer (an individual acting outside their business) and a trader (a person acting for purposes relating to their business). Under the DMCCA, ‘business’ includes a trade, craft or profession, and any other undertaking carried on for gain or reward.

This means that informal, community-run savings clubs which are not operated for gain or reward may not fall within scope. However, where organisers are running a scheme in a way that constitutes a business for example, where it is operated for gain or reward, they may be considered traders and the scheme could fall within scope. Organisers who are uncertain about whether they are acting as a trader for the purposes of the legislation should seek legal advice.

Understanding what constitutes a consumer savings scheme contract is crucial for both businesses that offer these schemes and consumers who participate in them.

To fall within scope, an arrangement must meet the following criteria.

1. Involve payments made by a consumer to a trader

A consumer agrees to make payments to a trader in advance of receiving goods or services. This is the foundational activity that establishes the financial relationship between the consumer and the trader.

2. Include crediting those payments to an account for the consumer

Payments made by consumers are credited to an account held by the trader for the consumer. While some businesses may operate individual named accounts for consumers, others may use different systems, such as pooled accounts or voucher-based schemes like savings stamps.

3. Provide that the payments are redeemable against goods, services, or digital content

The core purpose of the funds in this account is to allow the consumer to redeem them in exchange for goods, services, or digital content as stipulated by the terms of the contract.

To be in scope, the scheme must also have at least one of the following characteristics.

Restrictions on when funds can be redeemed

For example, a scheme might say that funds can only be used in December, or only after a minimum period of saving.

Incentives that influence the timing of redemption

This includes bonus credit or discounts available only at certain times for example, a 10% top-up for using the funds after a certain time.

Marketing that influences when funds are used

Even if the contract terms do not restrict redemption, a business may promote specific redemption periods such as advertising that consumers who use funds during a certain period such as a sale, will get better value.

These characteristics are intended to capture schemes that operate like seasonal or goal-based saving vehicles, where timing and consumer behaviour are guided by the structure of the scheme.

Case study: Distinguishing contractual incentives from marketing and advertising influences

Background: Consumer savings schemes seek to influence when consumers redeem their funds. Some schemes include formal contractual terms that reward or penalise consumers for redeeming funds at specific times. Others may encourage certain redemption behaviours through marketing or promotional messaging, even if there are no contractual restrictions or incentives.

Contractual restriction: A scheme allows consumers to redeem their funds for goods or services, but the terms specify that the funds cannot be redeemed until at least 3 months after the first payment is made. This is a restriction on timing of redemption.

Contractual Incentives: A retailer offers prepaid store credit that can be used for purchases throughout the year. The contract terms specify that customers who redeem their savings in November receive an additional 10% bonus credit, while those who redeem at any other point receive no bonus. This is a contractual incentive that seeks to influence when consumers choose to redeem their funds.

Marketing and advertising influence: A retailer runs a similar scheme, but without contractual incentives. Instead, its marketing campaign emphasises that customers who use their store credit in January can take advantage of exclusive discounts and promotions. While the scheme itself does not impose any formal restrictions or rewards, the advertising encourages consumers to delay their redemption, influencing their behaviour.

Excluded savings contracts

Understanding exclusions from consumer savings scheme contracts

The DMCCA regulates consumer savings schemes, but it’s important to recognise that certain arrangements are specifically excluded from these rules. These exclusions ensure that the legislation accurately targets the intended sector without overlapping with or duplicating existing regulations that adequately govern other types of agreements.

The following arrangements are explicitly excluded from the scope of the consumer savings scheme provisions, providing clarity for businesses and consumers about where these rules do not apply.

Utilities contracts

Contracts with electricity, gas, heat network, water and sewerage suppliers for the supply of electricity, gas, heating, cooling, hot water, water or sewerage across the UK, where these are supplied under specific licences, authorisations or duties set out in schedule 24 of the DMCCA including specific provisions for Northern Ireland.

Insurance and financial services

Contracts that are already regulated under existing financial services legislation as set out in schedule 24 of the DMCCA, are excluded from the CSS provisions of the DMCCA.

These include:

• banking services such as current accounts, savings accounts, and fixed-term deposits

• credit services including personal loans, credit cards, and overdraft facilities

• insurance products encompassing life insurance, home insurance, and other general insurance policies

• personal pensions and investment services such as individual pension plans and investment portfolios

• payment services such as electronic money accounts and money transfer services

These types of contracts are typically regulated by the Financial Conduct Authority (FCA) and, where applicable, the Prudential Regulation Authority (PRA). As they fall under existing financial regulatory frameworks, they are not subject to the additional requirements set out in the CSS provisions.

Contracts regulated by the Office for Communications (Ofcom)

Contracts for services that are already regulated by Ofcom are excluded from the CSS provisions. These include:

• mobile phone services (for example pay-monthly or SIM-only contracts)
• broadband internet services
• premium rate services (for example, directory enquiries or TV voting lines)

These types of services are already subject to consumer protection rules under Ofcom’s General Conditions of Entitlement, and therefore not within scope of the CSS provisions.

Small businesses

Contracts between consumers and traders where the trader’s annual turnover is less than £1 million, and where the consumer savings scheme contracts do not involve consumer accounts being credited with more than £120 at any time. For traders in their first year of business, this exclusion applies if the account credit does not exceed £120, regardless of turnover. See case studies in ‘Practical application of small business exclusion in consumer savings scheme section

Childcare voucher schemes

Childcare voucher schemes under the Income Tax (Earnings and Pensions) Act 2003, are excluded as they operate under separate tax and employment benefit rules.

Package holidays

Contracts that meet the definition of a package travel contract under the Package Travel and Linked Travel Arrangements Regulations 2018 are excluded from the CSS provisions. This exclusion does not extend to linked travel arrangements or other contracts that may be within the scope of the 2018 regulations but do not meet the definition of a package travel contract.

Practical application of small business exclusion in consumer savings schemes

To help illustrate the practical application of the small business exclusion, a series of case studies is included. These examples explore various scenarios that businesses might encounter relative to the £1 million turnover threshold and the £120 per consumer per year contribution limit. They are designed to provide guidance on how legislation may apply to different businesses.

These case studies demonstrate the conditions under which businesses are either obligated to implement protective measures for consumer prepayments or are exempt from doing so.

Case study 1: large business with low consumer contributions

Business context: A nationwide stationery chain with a turnover exceeding £5 million offers a ‘Back to School Club’ where consumers can contribute funds throughout the year to purchase school supplies in August. Each consumer contributes around £100 annually.

Compliance requirement: Even though each customer contributes less than £120 per year, this business’s high total sales mean it does not qualify for the small business exemption. Therefore, it must follow the law that protects customer prepayments by setting up trust or insurance arrangements and notify users of the scheme accordingly. This ensures that if the business fails, the customers’ money is still safe.

Case study 2: small business exceeding contribution threshold

Business context: A local butcher shop with an annual turnover of £800,000 operates a ‘Christmas Turkey and Food Club’. Customers contribute monthly, accumulating to £150 by December to cover their holiday meal needs.

Compliance requirement: Although the butcher’s turnover is below the £1 million threshold, each customer’s annual contribution of £150 exceeds the £120 limit. Consequently, the butcher must implement protective measures to safeguard these prepayments, either through insurance or trust arrangements. If opting for a trust, the butcher would require a trust deed to be drafted specifying how the funds are to be managed and used and how the trust should operate.

Additionally, the butcher would need to appoint an independent trustee to oversee the trust. This trustee should be someone who isn’t involved in the daily operations of the butcher shop and who has no interest in the assets of the business.

For example, a solicitor or accountant could be suitable, but only if they are independent of the business. Their role would be to ensure that the consumer funds are managed appropriately and used exclusively to fulfil consumer orders, providing an essential safety net in case the business faces financial difficulties.

Case study 3: small business adjusting contribution limits mid-year

Business context: A small bookshop, with an annual turnover of less that £1 million, part of a local community, launches a ‘Summer Reading Fund’ where consumers can save money to buy books during a summer festival in July. Initially, the scheme was designed to accept only £100 per customer, but due to popular demand and an expanded list of available books, the shop decides to increase the limit to £150 per customer in October.

Compliance requirement: Initially, the bookshop did not need to protect consumer prepayments because both the turnover from the previous financial year and individual contributions were below the respective thresholds (£1 million and £120). However, once the shop adjusted the contribution limit mid-year to exceed £120 per consumer, it then fell into the scope of the legislative requirements.

From October onwards, the bookshop must have in place protective measures such as trust accounts or insurance to safeguard the increased consumer prepayments. These protections must apply to all consumer funds held, including deposits made before October.

This means that money contributed prior to the change must also be covered by the protection arrangements, since those funds remain with the trader and are part of the scheme that exceeds the exemption threshold.

Insolvency protection requirements for consumer savings schemes

To ensure the security of consumer prepayments within savings schemes, the DMCCA imposes insolvency protection requirements on traders operating these schemes. These protections are designed to safeguard consumer interests in the event of a trader’s financial failure, ensuring that consumers can recover their prepayments and are not left at a disadvantage.

For the purposes of this legislation, a trader is considered insolvent if they are subject to:

• a bankruptcy order
• a winding-up order
• the appointment of a liquidator, administration
• the appointment of an administrative receiver

These conditions also extend to equivalent insolvency procedures in jurisdictions outside the UK.

Mandatory arrangements

Traders must establish and maintain protective arrangements as specified in section 286 (insurance arrangements) or section 287 (trust arrangements) of the DMCCA. These measures are required to adequately cover the costs of returning any protected payments to consumers should the trader become insolvent.

Contractual obligations

Traders must comply with the insolvency protection requirements set out in the DMCCA – either by maintaining an appropriate insurance arrangement or by placing consumer funds in a trust. These are statutory duties that apply to all traders operating consumer savings schemes within the scope of the Act.

In addition, it is an implied term of every consumer savings scheme contract that the trader will meet these insolvency protection requirements. This means that even if the contract does not mention them, the law treats these protections as part of the agreement with the consumer. The act also sets out separate legal obligations for traders to provide consumers with clear information about the protections in place. These information requirements are also implied terms of the contract.

Requirements for operators based outside the UK

Traders who operate consumer savings schemes within the UK but are not established in the UK are also bound by these insolvency protection requirements. This provision aims to maintain a level playing field and protect consumers from risks associated with foreign-operated schemes.

Insurance arrangements for insolvency protection in consumer savings schemes

One effective way to meet the insolvency protection requirement is through maintaining appropriate insurance arrangements.

Essentials of insurance arrangements

Traders must maintain insurance policies from insurers authorised to operate within the UK, the Channel Islands, or the Isle of Man.

Criteria for an appropriate policy

An adequate insurance policy under this framework must:

• cover the cost of returning the full amount of protected payments held at the time of the trader’s insolvency
• ensure that consumers are the insured parties for the purposes of claims related to the trader’s insolvency
• avoid exclusions that negate liability if certain actions are taken or omitted after the event giving rise to a claim, if the policyholder fails to make payments under the policy or on other policies, or if certain records are not maintained or disclosed

Financial responsibility of the trader

Traders are required to bear the expenses related to setting up, maintaining, and any associated charges or taxes of the insurance policy. Importantly, these costs must not be passed on to consumers through their protected payments, ensuring that the consumer’s funds are fully allocated towards their intended savings goals without additional burdens.

Trust arrangements for insolvency protection in consumer savings schemes

As an alternative to using insurance, traders may choose to protect consumer payments through a trust arrangement. This provides another method of safeguarding funds under the DMCCA insolvency protection requirements.

Overview of trust arrangements

Establishment of trust

Traders must establish a trust to hold all consumer payments made under consumer savings schemes. This should be done through a legal document (a trust deed) which sets out how the trust will operate, including who the trustees are and how funds will be used, and under what conditions they may be released. These trusts are required to be administered within the UK.

Holding and releasing funds

Funds must remain in the trust and may only be released in accordance with the DMCCA provisions. The legislation specifies that trustees may only release funds for the following purposes:

• to pay suppliers for goods, services, or digital content to be provided under the consumer savings scheme
• to return payments to consumers in exceptional circumstances
• to disburse any remaining surplus once all consumers have received what they are entitled to

In the event of the trader’s insolvency, funds must be returned to the consumer. Trustees must not use or release funds for any other purpose. These permitted uses should be clearly documented in the trust deed.

Solvency declaration

Before releasing funds to suppliers for goods, services or digital content due under the scheme, trustees must receive a declaration from the trader affirming the trader’s solvency. This requirement should be included in the trust deed to ensure trustees follow the correct process before allowing funds to be used.

Independence of trustees

To ensure impartiality, the trustee (or where there is more than one, the majority of trustees) must be independent of the trader. This means they must have no interest in the trader’s business or assets, and must not be connected to, or be an associate of, the trader or any insolvency practitioner appointed in relation to the trader. The trust deed should make clear how independence will be safeguarded in trustee appointments.

Administrative responsibilities

The trader is responsible for all costs associated with administering the trust, including legal, trustee, and audit related expenses.

The Digital Markets, Competition and Consumers Act 2024 requires that the trust’s accounts must be audited once every 3 years by an independent auditor. The legislation does not require an audit of company accounts and the policy intent is that the independent audit be carried out by a suitable professional (such as a suitably qualified accountant), depending on the circumstances. Financial records should be maintained and the resulting accounts reviewed to ensure the trust is being operated in line with the trust deed and the obligations under section 287 of the act. This includes reviewing the systems, records, and processes used to manage consumer funds – such as ensuring that funds are only being used for the permitted purposes.

Protection against insolvency

In the event of the trader’s insolvency, the trust mechanism ensures that any funds held on behalf of consumers are returned to them.

Case study 1: implementation of trust arrangements for a Christmas savings club

Background: A Christmas savings club offers consumers the opportunity to make regular payments throughout the year, which can be used to buy goods, services and vouchers in November. The club previously operated without formal insolvency protection but is now required to comply with the DMCCA from 1 January 2026.

Setting up the trust: To comply with the new rules, the club establishes a trust to safeguard all consumer payments. A solicitor is engaged to draft a trust deed that sets out the structure and operation of the trust.

The deed specifies:

• the appointment of 3 trustees, 2 of whom are independent of the business
• the permitted purposes for using the funds (for example, paying suppliers, returning money to consumers in certain circumstances, or paying profits after all customer orders have been fulfilled)
• a requirement for the trader to provide a solvency declaration before funds can be used to fulfil customer orders
• the arrangements for independent audit every 3 years

Operational details: The trust is administered in the UK, and trustees only release funds in accordance with the deed, for example:

• when preparing to pay suppliers, the trustees request and receive a declaration from the business operating the scheme confirming they are solvent

• if a consumer decides to cancel their participation in the scheme part way through the year, for example, because they are moving abroad, the trust deed may allow for their funds to be returned. The DMCCA requires trustees to be able to return payments in exceptional circumstances, but the deed can define what counts as exceptional. Whether a return is made may depend on the criteria set out in the deed and the judgement of the trustee

• after all goods and vouchers are issued, any profits may be paid in line with the deed

The trader covers all costs linked to the trust arrangement, including drafting the deed, appointing independent trustees, and carrying out audits. These expenses must not be taken from consumer’s contributions

What happens if the trader becomes insolvent: In accordance with the legislation, should the club face insolvency, the trust arrangement ensures that all monies held are returned to the consumers. This protects consumers from losing their payments.

Information requirements for consumer savings schemes

To ensure transparency and safeguard consumer interests, the legislation mandates specific information disclosure requirements for traders operating consumer savings schemes. These requirements are designed to provide consumers with essential details about the protection mechanisms in place for their prepayments.

Compliance obligations for traders

Initial disclosure

Within 30 working days of receiving the first payment from a consumer under a consumer savings scheme contract, traders must provide the consumer with the following information:

• the name, address, telephone number, and email address of the insurer or trustees responsible for protecting the consumer’s payments

• the policy number for the insurance under which the consumer’s payments are protected, if insurance arrangements are used

• a copy of the trust deed under which the consumer’s payments are held if trust arrangements are in place

Updates on change: Should there be any change to the provided information, the trader must update the consumer within 30 working days of the change taking effect. This ensures that consumers always have access to the most current information regarding the safeguarding of their funds.

Responding to consumer requests: If a consumer requests in writing the information outlined, the trader must supply it, free of charge, within 30 working days of receiving the request.

Clarity and accessibility: Information must be presented in clear, plain language and, if provided in writing, must be legible. This is crucial for ensuring that all consumers, regardless of their background or expertise, can easily understand the terms and protections associated with their savings.

Method of delivery: The mode of delivering this information varies based on how the consumer savings scheme contract is entered into:

• in person: information must be provided in writing on a durable medium

• online: information should be displayed clearly on the webpage where the contract can be entered into and must be accessible without requiring any additional actions from the consumer

• orally (for example, over the phone): information must be conveyed in an audible and comprehensible manner

Post-contract provision: For contracts not entered into in person, traders must also provide the information in writing on a durable medium as soon as reasonably practicable after the contract has been finalised.

Compliance: Traders operating consumer savings schemes within the UK, but who are not based in the UK, must also adhere to these information requirements.

Compliance with these information requirements is an implied term of every consumer savings scheme contract. This means failure to comply could lead to contractual disputes and other legal consequences. Non-compliance can result in enforcement actions taken by authorised enforcers, which may include fines, orders to make amends to affected consumers, or other corrective measures.

Relationship with the Consumer Contract Regulations (Information, Cancellation and Additional Charges) 2013 (CCRs): The information requirements under section 288 of the DMCCA apply specifically to consumer savings scheme contracts. These requirements sit alongside the existing obligations under the CCRs. Where the information duties in section 288 are met, a trader does not need to repeat the same information under the CCRs. However, any additional information requirements set out in the CCRs that are not covered by section 288, such as cancellation rights or pre-contract information, must still be complied with.

Enforcement: Enforcement of these requirements is primarily carried out by Trading Standards in Great Britain and the Department for the Economy in Northern Ireland, which have the authority to investigate potential violations and apply to the court for sanctions. This may involve close co-ordination with other regulatory bodies such as the Competition and Markets Authority (CMA). Traders are expected to maintain records that demonstrate their compliance with the information requirements and to provide these records upon request by the regulatory authorities.