The Government recently announced plans to expand its dormant asset scheme to include assets from the insurance and pensions, investment and wealth management, and securities sectors. This money will be used to aid the Covid-19 recovery.
A dormant asset is defined as a financial product, for example a bank account, which has been left untouched for many years and which the provider, following industry best practice, has not been able to reunite with its owner. The dormant asset scheme is voluntary, which means business can choose whether or not to participate and how much they wish to transfer.
The Reclaim Fund, which was established in 2011, distributes the money from participating bank and building society accounts that has been left unclaimed for 15 years. So far, it has released around £150 million to help with the Covid-19 recovery.
There are around 30 banks and building societies that are included, but the expansion of this scheme will see the programme open up to City firms across the insurance and pensions, investment and wealth management, and securities sectors. This could potentially release a further £800 million to help assist the Covid-19 recovery.
This change comes after a 4-year review and public consultation process, which found there was widespread support for the scheme. The different sectors will each have their own guidelines, which will outline when assets can be moved to the Reclaim Fund. Reasonable efforts will need to be made to track down customers and reunite them with their accounts before they can be transferred to the Reclaim Fund.
This scheme will be led by the financial industry and backed by the UK government. The scheme will be focused on consumer protection, with the main priority being to reunite people with their lost funds. This will involve trying to find people who may have moved to a new house, for example, by tracing them via Royal Mail, email, telephone, a tracing service, or a credit reference agency.
That said, the scheme ran into trouble earlier this year when it was revealed HSBC had been warned by its compliance staff in 2017 that it was not doing enough to reunite customers with their money before transferring it to the scheme. While HSBC denied it wasn’t doing enough, it has since made changes to improve its dormant account policy.
Since 2011, the dormant asset scheme has contributed £745 million to charitable initiatives from dormant accounts that have been unattended for a minimum of 15 years.
In England, any money from the dormant asset scheme must be used for organisations and initiatives that are focused on young people, financial, or social investment. So far, more than £650 million has been invested in these causes across four different organisations:
1. The Youth Futures Foundation (£90m)
2. Fair4All Finance (£96m)
3. Big Society Capital (£425m)
In Wales, the funding is reserved for programmes that focus on climate change and supporting young people with disabilities into employment.
The Scottish government directs dormant assets funding to the Young Start programme, which aims to improve the physical and mental wellbeing of young people by supporting them to learn new skills and enter employment.
In Northern Ireland, dormant assets funding is reserved for the voluntary, community and social enterprise sector.
The expansion of the scheme will mean hundreds of millions can be invested into good causes and it will play a vital role in the recovery from the Covid-19 pandemic.
Get in touch, if you’re worried you may have dormant assets, or you have lost track of your pension funds. We can help you use the government’s lost pension tracker to try and locate your lost pensions: https://www.gov.uk/find-pension-contact-details.