Insured deposit schemes: 9% in survey would pick an alternative

If the Government ends insured deposit schemes, 9% of landlords surveyed would move straight to a deposit alternative. That comes from a survey of 800 private landlords by Zero Deposit, a deposit alternative provider (PropertyWire, 11 September 2026). The "more than one million landlords" headline also counts the 26% who said tenant preference would guide them. So it is not a count of landlords committed to switching.

What is the Government proposing for insured deposits?

Lee Dillon MP asked about "the current proposal to remove insured tenancy deposit schemes". Matthew Pennycook answered for the Ministry of Housing, Communities and Local Government on 12 June 2026 (UK Parliament, written question 7013). Under an insured scheme, the landlord or letting agent holds the deposit. Under a custodial scheme, the deposit protection provider holds it as a neutral third party.

Mr Pennycook's answer said the insured model creates "an inherent power imbalance against tenants", and that there is "growing evidence" it carries a higher fraud risk. It added that tenants can face delayed reimbursement when agents fail to maintain insurance or Client Money Protection cover (insurance for client money an agent holds).

Timing is the open question. PropertyWire reported on 11 September 2026 that the Government has not yet confirmed a timeline. None of the sources consulted for this article points to a published consultation document or draft legislation. Our free landlord resources cover the deposit rules that apply today.

Jurisdiction matters too. The approved schemes GOV.UK lists cover England and Wales, while Scotland and Northern Ireland run separate schemes (GOV.UK). Mr Pennycook's answer does not say whether the change would extend to Wales.

What would landlords actually do?

Zero Deposit's survey found 64% of surveyed landlords said they would transfer deposits into a custodial scheme. Another 9% would move directly to a deposit alternative, a product offered in place of a traditional deposit, and 26% would be guided by tenant preference (PropertyWire, 11 September 2026).

Zero Deposit applies those shares to the Government's estimate of 2.86 million private landlords. On that base, 9% is about 257,000 and 26% is about 744,000. The release's own figures run slightly higher and do not reconcile exactly with 2.86 million. Together, 35% of 2.86 million is about one million, but nearly three quarters of that group only said tenants would steer them.

These numbers come from research published by Zero Deposit. Zero Deposit sells the product the survey asks about, and PropertyWire's report gives no method beyond the sample size. Chief executive Sam Reynolds said landlords want "a broader toolkit of trusted solutions" rather than a single replacement.

The priorities are more useful. Securing protection against damage came first at 25%, then faster dispute resolution at 17% and regulatory certainty at 16%. Lower costs and reduced administration scored 15% each (Zero Deposit, via PropertyWire, 11 September 2026).

What does it mean for your tenants and your cashflow?

Scale first. Figures from the Tenancy Deposit Scheme suggest the changes could affect how more than 2.1 million tenancy deposits are held and managed (PropertyWire, 11 September 2026). If you hold deposits under an insured scheme today, a custodial-only system would move that money out of your hands.

Only 3% of surveyed landlords named cashflow as a deciding factor. But if deposit cash currently cushions your repairs or void periods (weeks a property sits empty), it is worth checking the numbers. Our free stress test calculator shows how much margin your rent leaves.

Your tenants see it differently. Mr Pennycook's answer says custodial schemes give tenants more confidence to challenge deductions and use Alternative Dispute Resolution (the schemes' service for settling deposit disputes). Only 9% of surveyed landlords said tenant affordability influences their choice, so some tenants may want different options from the ones landlords rank highest.

In practice, I would start with an audit of which deposits sit in which scheme. Consider asking tenants at renewal whether they would prefer a custodial deposit or an alternative. Our business and systems guides cover building that check into your lettings routine.

Whatever the final rules, deposit handling is now part of the cost of running a tenancy well. Our property investment strategies hub covers how compliance costs feed a hold decision.

Key takeaways

• A Zero Deposit survey of 800 private landlords found 9% would move directly to a deposit alternative if insured tenancy deposit schemes end.

• 64% of surveyed landlords said they would transfer deposits into a custodial scheme, and 26% said tenant preference would guide them.

• The "more than one million landlords" figure combines the 9% and the 26%, applied to a Government estimate of 2.86 million private landlords.

• Matthew Pennycook set out the case for removing insured schemes in a written parliamentary answer on 12 June 2026; PropertyWire reported on 11 September 2026 that no timeline has been confirmed.

• Tenancy Deposit Scheme figures suggest more than 2.1 million deposits could be affected in how they are held and managed.