Ed Balls, Economic Secretary to the Treasury, has launched proposals to introduce an unclaimed assets scheme which would allow money laid dormant in bank and building society accounts for 15 years to be reinvested "in society".
Following the report by the Commission of Unclaimed Assets: ‘The Social Investment Bank’ which was published last week, the government has now outlined proposals which it says have the support of both the British Bankers' Association (BBA) and the Building Societies Association (BSA).
The idea was raised by the Treasury in the March 2006 Budget so the 48-page consultation document now outlines details of the scheme, including the banks and building societies' proposed changes to the Banking Code and proposals for legislation.
It proposes the new scheme will apply to bank accounts where there has been no customer activity for at least 15 years, at which time the assets will be transferred to a central reclaim fund.
On this basis, banks and building societies estimate several hundred million pounds may currently lie unclaimed in dormant accounts, and it is estimated tens of millions more may become available each year.
However, the Treasury points out these figures do not take into account the effect of a “reuniting exercise” launched by banks and building societies in advance of the scheme which will see the institutions improve on their existing arrangements to help customers track down their accounts.
Although despite the proposals the government points out consumers will still be able to reclaim their money, as the process for this will not change they will simply have to visit their bank or building society which will repay their money, just as they do now.
- The government says the key principles of the new scheme will be to:
- Wherever possible reunite account holders with their rightful assets
- To provide a legal right for account holders to reclaim their money at any time
- To take a light touch approach which minimises running costs for the scheme and participating institutions through building on existing infrastructure to maximise the money available for reinvestment in the community
- To take account of better regulation principles
The government points out the proposed scheme will “differ significantly from other international arrangements” as it will be in part a self-regulatory scheme, and it adds by placing the funds in a single reclaim account it will centralise the risk and allow the money to be pooled and managed efficiently.
A further government consultation document will be published later in the spring to consider the most effective means of distributing the available assets, although the funds are likely to be reinvested in the community, with a focus on youth services which are responsive to the needs of young people, and also on financial inclusion and capability.
Balls says this is a unique opportunity to provide for worthwhile reinvestment in youth services, financial inclusion and capability, while balancing the financial interests of consumers.
He adds: “The document builds on the excellent cooperation with the banks and building societies. We welcome the ongoing commitment from the sector to working together to make the scheme a success."
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
New ratings system for younger funds
Clients to be compensated by end of 2018
Rolled out to 25 schemes next month
Mean gender pay gap now 16.64%
26 years in financial services