Custodial vs insured deposit protection compared

In England.

custodial or insured deposit scheme

Both custodial and insured deposit schemes are government‑approved ways to protect tenancy deposits in England: a custodial scheme holds the tenant’s money itself, while an insured scheme lets the landlord or agent keep the money but pays the scheme a fee or premium. Whichever you use you must protect the deposit and serve the prescribed information within 30 days of receiving it; failure risks a court penalty of between 1× and 3× the deposit and prevents a valid s.21 notice until remedied.

what is the difference between a custodial and insured deposit scheme

A custodial scheme physically holds the deposit in a designated account for the tenancy duration and is typically free to use; an insured scheme leaves the deposit with the landlord or agent, who pays a fee to the provider so the scheme guarantees repayment if the landlord cannot or will not pay. The statutory duties (protect within 30 days, give prescribed information) and penalties under the Housing Act 2004 apply equally to both types; the operational and commercial differences are set out in each scheme’s terms and pricing.

custodial vs insured deposit protection

Custodial protection means the authorised provider controls the cash and releases it on agreement or after ADR; insured protection means the landlord holds the cash and the scheme provides insurance cover subject to its contract. Custodial schemes usually advertise no per‑deposit charge; insured schemes always involve a fee or premium, with agent discounts or subscriptions possible — check the provider’s live tariff before deciding.

how is an insured deposit different from a custodial one?

The practical differences are who holds the money, who pays, and how risk is allocated: in insured schemes the landlord/agent holds the deposit and pays a fee to the scheme, which will pay the tenant if the landlord defaults and then recover sums from the landlord; in custodial schemes the scheme already holds the funds and pays out according to agreement or ADR. The Housing Act 2004 does not itself define these product labels — the details live in the schemes’ own rules and Ts&Cs.

is the dps a custodial tenancy deposit scheme

No — the Deposit Protection Service (DPS) operates both DPS Custodial and DPS Insured products; it is one of the three authorised providers in England (DPS, TDS and mydeposits) and offers custodial and insured options rather than being custodial‑only.

are insured deposit protection service plans cheaper than custodial?

There is no government statement that insured plans are categorically cheaper; custodial protection is generally free at point of use while insured protection carries explicit fees, so custodial is cheaper in direct per‑deposit charges for standard tenancies. Total cost comparisons (including cash‑flow value of holding deposits, interest, volume discounts and admin) are commercial and vary by landlord/agent, so check each scheme’s published tariff before choosing.

what is the tds insured deposit scheme?

TDS Insured is Tenancy Deposit Scheme’s insurance‑based protection: the landlord or agent keeps the deposit in their account, registers the deposit with TDS, pays the applicable per‑deposit fee or membership charge, and must provide the prescribed information within 30 days. If the landlord fails to return money after ADR or an order, TDS will pay under its insurance and then seek recovery from the landlord/agent under its contract.

my deposits custodial

mydeposits Custodial is mydeposits’ custodial product: the scheme holds the tenant’s deposit in a custodial account during the tenancy and publicly advertises custodial protection as free to use for standard assured shorthold tenancies. As with other custodial schemes, the scheme’s Ts&Cs govern interest, payout timing and dispute handling while the Housing Act 2004 sets the statutory protection and prescribed‑information duties.

I've always used an insured deposit scheme where I hold the money myself rather than a custodial one — since I'm the one holding my tenants' deposits and earning whatever interest builds up on them, is that interest actually mine to keep, or does it legally still belong to the tenant even though the scheme itself never touches it?

Interest on a deposit held by a landlord under an insured scheme is not allocated by statute; the deposit principal remains the tenant’s money subject to lawful deductions, but whether a landlord may keep interest depends on the tenancy agreement and the scheme’s terms and conditions. In short: the Housing Act 2004 does not say interest belongs to the landlord or tenant — it is a contractual and common‑law question (trust and terms of the tenancy), so check the tenancy wording and your scheme contract.

My tenant's deposit sat with a custodial scheme for over five years, and when it came to returning it, the scheme said they'd only pay around £15 in interest because the base rate was below some undisclosed threshold for most of that time, and refused to explain the calculation — is a custodial scheme actually obliged to disclose how it works out what interest it pays, or can it just decide unilaterally?

No statute requires custodial schemes to publish a detailed interest‑calculation formula; how interest on pooled custodial funds is treated is governed by the authorised scheme’s published terms and conditions. Authorised custodial schemes commonly set thresholds and rules about paying interest (or retaining it to fund operations), and those details live in their Ts&Cs rather than in Housing Act text — if you need clarity, the scheme’s customer terms and complaints/ADR route are the place to press for an explanation.

The platform I use for tenant referencing and deposit protection has changed its terms so that it now keeps any interest earned on custodial deposits itself, rather than passing it to the tenant when the deposit's returned — is that something a deposit protection scheme or its partner platform is actually allowed to just decide to keep, or does the interest legally belong to whoever's money was on deposit?

A scheme or its partner platform can only keep interest insofar as its contract with landlords/tenants and the scheme’s authorisation allow it; Housing Act rules require the deposit principal to be protected and returned correctly but do not assign blanket statutory ownership of interest. Whether the platform may retain interest therefore depends on whether the platform is the authorised scheme or an intermediary, and on the written terms the landlord and tenant agreed — if terms have changed mid‑tenancy or without proper notice you may have contractual remedies and should raise the issue through the scheme’s complaints and ADR processes.

See also our guides: Deposit protection scheme comparison: DPS vs MyDeposits vs TDS and Tenant deposit dispute: how to resolve it legally in England & Wales.

Last reviewed August 2026.