There’s a lot of money stashed away waiting to be reclaimed. The government estimates that there are £2.1bn of ‘dormant’ assets in the UK insurance and pensions sector, and a further £1.4bn sitting dormant in the investment and wealth management sector. To put that in context, that is more than a third of the UK’s total capital gains tax receipts in 2019/20, which came to £9.5bn.
Fortunately, the government has devised a way to put so-called dormant assets to good use. Since 2011, a selection of banks and building societies have joined the Dormant Assets Scheme, where companies unable to reunite owners with accounts transfer money into a fund, called the Reclaim Fund, which supports social and environmental initiatives across the UK.
The scheme’s priority is to unite people with their financial assets, and money is only currently paid from bank accounts that have been inactive for more than 15 years and following several attempts to track down the account’s beneficiary. While it is voluntary for banks to sign up, so far the Reclaim Fund has paid over £745m to social and environmental initiatives, from more than £1.35bn paid into the fund.
Earlier this month the government extended the scheme to cover assets in the insurance, pensions, investment and wealth management sectors. The government estimates this will bring £1.7bn of additional assets sitting idle into the Reclaim Fund, which could make £880m available to help support vulnerable people as we recover from the pandemic.
Investors and pension savers don’t need to worry about their accounts being pinched and absorbed into the scheme. It is specifically designed to make sure it attracts assets that are never going to be reclaimed. Importantly, if you were to slip through the net and your assets were paid into the scheme, you could claim the money back at any time.
Pension and life insurance accounts will only be classed as ‘dormant’ if the account owner is deceased and has no next of kin, or if there has been no contact from beneficiaries managing the estate for at least seven years. Investment accounts will only be classed as dormant if the owner has been identified as gone-away for at least 12 years.
The fund currently retains about 40 per cent of the money it receives in order to meet any reclaims. But, unsurprisingly, few assets have been reclaimed to date. In total, customers have only reclaimed £93m since the fund was established, which is less than 7 per cent of the £1.35bn collected over the same period and lower than the £147m transferred in 2019 alone.
Roughly £400m of funds collected via the scheme so far have been used to establish Big Society Capital, an independent social impact-led investor. £90m has been provided to Youth Futures Foundation to break down the barriers to work for young people and £55m was allocated to establish Fair4All Finance, a scheme to support the financial wellbeing of vulnerable people.
While these contributions feel negligible compared with the staggering sums the government is spending to fight Covid-19, they are making a real difference to thousands of lives.
