Retention Instrument

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Retention Instrument | for construction contractors

As a legal requirement of the Construction Contracts Act (CCA), retention money must be protected so that if the head contractor becomes insolvent or refuses to return the retention money to the sub-contractor when it is due, the sub-contractor does not suffer the financial loss of losing their retention.

Under the CCA, acceptable solutions are:

  • To hold the funds on trust as cash or some other liquid asset (“on trust”); or

  • Secure the funds via a complying instrument.

Currently, there is no complying instrument available. Contractors have been complying with the CCA by holding retention money on trust. This causes considerable constraint on operations due to restricted cash flow and is an ineffective use of capital.

Aon Solution

Aon can provide a solution by way of a complying instrument under the CCA called a Retention Instrument. It means contractors can use the cash sitting on trust.

The Retention Instrument secures a specific dollar amount of retentions so that it’s not necessary to hold the cash or liquid asset on trust for the benefit of sub-contractors. Advantages of a Retention Instrument:

  • Frees up cash. Retention cash does not have to be held;
  • Administered by an independent licensed insurer;
  • Contractor does not have to disclose to the sub-contractor all retention money held and who the retention is held for (or the bank balance amounts);
  • Does not require significant cost be incurred in establishing a trust and the ongoing cost of administrating the trust;
  • Provides independent evidence to the sub-contractor by way of a certificate issued by the insurer in compliance with the CCA.

Advantages and disadvantages of a Retention Instrument vs on trust | click here.

Apply for a Retention Instrument here.

Need to claim your retention?


Talk to Aon about a Retention Instrument

Contact | Warren Tucker, Executive Director, Aon Construction
Call +64 9 362 9079  or  +64 27 523 0085  | Email


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