UK savers who lost track of their pension and investment funds will have their money used for charitable causes under new government plans to expand its dormant asset scheme beyond banks.
The move will see more than £800m ($1bn) made available to charities to support unemployed young people, those in financial difficulty, and the UK’s growing social investment market.
The Reclaim Fund was established in 2011 after banks were accused of boosting their balance sheets by sitting on dormant savings.
Currently, around 30 banks and building societies take part in the scheme, but the new scheme will open to City firms across the pensions, insurance, investment and wealth management sectors. Each sector will have their own rules to decide when assets should be shifted to the Reclaim Fund.
Under the current scheme, cash is distributed from bank and building society accounts that are left unclaimed for at least 15 years.
Firms are expected to trace down account holders and reunite them with their savings before the dormant cash is handed over to the government’s Reclaim Fund.
But, only a small proportion of deposits are ever recovered by their rightful owners after they are transferred, at a rate of just 5% a year.
In May, the government released £150m from the Reclaim Fund to charities to help provide COVID-19 relief to social enterprises and vulnerable individuals.
The government has to put forward legislation to expand the fund before it can move forward with the proposed changes.
The programme distributes half of the assets to good causes, while retaining half to reimburse anyone who does eventually come forward to claim the money.
So far, it has distributed £745m to charitable causes, against “just £200m initially expected.” Diana Barran, the minister for civil society, said. “That’s a pretty good experience to build on.”
Since the fund was established, account holders have only reclaimed £93m in total. This is less than 7% of the £1.35bn collected by the scheme over the same period and lower than the £147m transferred in 2019.
The Department for Digital, Culture, Media and Sport said that customers would still be able to apply to reclaim their assets in full at any time. It added that the expanded scheme “will have consumer protection at its heart, with the priority continuing to be locating and reuniting people with their financial assets.”
Watch: Why can't governments just print more money?