After an extensive consultation the government plans to legislate for the move to ‘unlock’ more than £800m for community investment.
The ABI estimates there is up to £2.1bn in unclaimed assets held by the life, pensions and investment sectors.
The Dormant Assets scheme uses money that has not been claimed from accounts and other financial products to invest in community projects.
Until now the scheme has mainly covered bank and building society accounts but will be extended to cover assets from the insurance and pensions, investment and wealth management and securities sectors.
Assets set to come within the scope of the dormant assets scheme include:
- Proceeds of dormant life insurance and retirement income policies
- Proceeds of dormant shares or units in collective investments
- Dormant investment asset distributions and proceeds
- Proceeds of, or distributions from, dormant shares
- Unclaimed proceeds from corporate actions
The government says the move will build on the £745m already distributed from dormant bank and building society accounts and help boost the UK economy as it recovers from the Coronavirus pandemic. Funding raised through expansion of the scheme will go to good causes, social investments and environmental initiatives.
The expansion follows completion of a four year review and public consultation process. The government says the responses showed “widespread support” for expansion.
The priority will still be to locate and reunite people with their financial assets but where that is not possible, more businesses will now be allowed to voluntarily transfer dormant assets into the scheme. People will still be able to reclaim their assets in full at any time.
Since 2011, 30 banks and building societies have released over £745m from dormant accounts that have been inactive for at least 15 years.
Some £150 million was unlocked in May 2020 to support the UK’s charity and voluntary sectors. The funding is supporting work to tackle youth unemployment, expand access to emergency loans for civil society organisations and help improve the availability of affordable credit to people in vulnerable circumstances.
John Glen MP, Economic Secretary to the Treasury said: “It’s right that these funds are used to tackle some of the UK’s most pressing social and environmental challenges. The expansion of the scheme will mean more people are reconnected with their assets, whilst also making more money available for good causes.”
The Treasury cited the example of a June 2020 initiative in which more than £800,000 of dormant assets funding was provided via the Young Start programme to 12 youth-led groups in Scotland, including Leonard Cheshire and Can Do Dumfries, to help young people boost their chances of future employment.
The ABI has welcomed the expansion.
Yvonne Braun, director of Long-term Savings and Protection at the ABI, said: “It is right that these truly dormant funds can be made available to good causes so they can make a real difference to people’s lives. Crucially, the proposals also ensure that no matter how long a fund has been dormant, the owner can claim their money back at any point in the future.
“With an estimated £2.1 billion dormant assets in the insurance and pensions sector, the message to customers is: It’s your money, come and claim it.”