Unclaimed insurance payouts, pensions and shares will soon be used to fund charities in a move that could collect up to £880m from lost and forgotten accounts. Next month will see the first of a series of significant changes to a government scheme which moves “dormant” money from financial institutions to the charity sector.
The Reclaim Fund, set up in 2011 to distribute the cash from bank and building society accounts that have been left unclaimed for at least 15 years, will start targeting dormant pension benefits, insurance assets, collective scheme investments and shares in FTSE-listed companies from early next year.
Over the last 11 years, some £1.6bn has been taken from dormant bank accounts, £880m of which has been passed on to charities.
The expanded scheme will bring in a large number of new financial products from the first three months of next year. A pilot starts next month.
Once the accounts have passed a minimum number of years untouched – 12 in the case of some of the new additions – the provider will try to contact the holder and, if unsuccessful, will then pass on the money to the fund.
“The government legislated to expand the scheme into broadly three new asset classes, the first of which is insurance and pensions, so the lost proceeds from contracts that people have with firms,” says chief executive Adrian Smith.
“The second area is in FTSE-listed company shares. So if you had shares with Vodafone or Coca-Cola, or something like that, and you’d lost those shares, that would be the second sector.
“The third is investments … unit trusts and investment bonds that you might have had with JP Morgan or Schroders, for example.”
Dormant shares will be sold and the money passed on to the fund. It is estimated that another £880m could be transferred from these three new areas, but over a number of years.
Under the existing scheme, about 40 banks and building societies transfer money every year to the fund. With the expansion, city firms across the insurance, pensions, investment and wealth management sectors will be able to join. This could amount to up to 500 new firms, says Smith.
Banks and building societies in the scheme hand over the sums that have lain completely untouched by the account’s owner for 15 years, and if no owner has been located after inquiries. The average amount in the accounts is £100.
If the account holder contacts their bank after the money has been moved to the fund, they can still get it back. Since 2011, the fund has given back £100m to banks.
“The same principle for the new scheme exists for the existing scheme, which is: if the customer comes forward, they will get back what they were entitled to if the transfer hadn’t happened,” says Smith.
After the money is collected, it is passed to the National Lottery Community Fund. To date, among other projects, this has been used to help young people into work and housing, and for those who are tackling financial exclusion.
Of the £880m transferred so far, more than £425m has been used to establish Big Society Capital, an independent financial institution aimed at connecting charities and social enterprises that want to borrow money, with investors motivated by a desire to deliver social change.
However the voluntary scheme has run into controversy. Last year, the Guardian revealed that HSBC had been warned by its own compliance staff in 2017 that it was not doing enough to reunite customers with their cash before freezing their accounts, and was potentially harming elderly and vulnerable savers who may have lost track of their savings.
HSBC denied it had mistreated customers, or that it took insufficient action, and said it had made “substantial and continuous improvements” to its dormant account policy since 2016.
Since 2008 consumers have themselves been able to reunite with lost bank accounts by using the industry-run “one-stop shop” service called mylostaccount.
By putting in personal details such as old addresses, the service contacts banks and building societies where there may be a dormant account.
Typically, accounts become lost when someone forgets to tell the bank or building society about a house move, or they simply forget that they have an account. There are also instances where someone discovers a savings account was set up when they were a child, but any paperwork has long since disappeared, or through documents discovered after a relative dies.
About 1.5 million people have applied for information since the service began – 100,000 a year, according to UK Finance, the trade body for banks, which is one of the organisations behind the system.
Banks have a recommended three months to respond. If it is found that there is an account, the consumer has to prove they are who they claim to be, such as by showing a passport. There is no upper time limit on when someone can apply for their money to be refunded.
There are 70 participants in the mylostaccount service, including major banks, 43 UK building societies and National Savings & Investments.
How to trace a lost account
• If you think you have money in a lost or dormant account, the first step is to contact the bank or building society involved. You can also use the mylostaccount service.
• Gather as much information as possible about yourself: previous addresses; sort codes; account numbers; authority from the account holder if it is not you; date of death, if it is the account of someone who has died.
• NS&I premium bond prizes can be checked on its website if you have the number.
• If a financial firm cannot find your account, or questions the validity of your query, you can appeal to the Financial Ombudsman Service.
• If the account is held overseas, you will have to contact the bank in the country where it is held.
