Putting forgotten money to good use

Budget week is always busy - a number of long-awaited announcements seem to come at once. And last week was no exception. On top of the Lyons review into Council Tax reform there was a consultation on what to do with forgotten accounts in banks and societies.

The idea that money which has not been touched for years in accounts which have lain dormant should be used towards community good causes was first floated by the chancellor in 2005. Talks with the industry started. The culmination of these was outlined in the document launched last week by Ed Balls, the economic secretary to the Treasury.

The proposals were made with the support of the British Bankers’ Association and Building Societies Association who jointly authored the foreword.

The document outlines plans to introduce an unclaimed assets scheme. Under the scheme, assets unclaimed for 15 years in bank and society accounts will be transferred to a body with an independent central reclaim fund. This fund will have responsibility for meeting the cost of claims by consumers, including any interest due.

The reclaim fund will then hand over the rest of the money for investment in the community. The government has set out its priorities as youth services and financial inclusion and capability.

The 15-year definition of dormancy is sensible. On this basis it is likely that accounts which have not been touched have genuinely been forgotten. It is thought that several hundred million pounds may lie unclaimed. Of course, once the first tranche of money is handed over, subsequent years will see a much smaller flow, perhaps tens of millions of pounds.

But before then, financial institutions signing up to the scheme (which it is proposed will be voluntary) will undertake a high profile reunion exercise to help customers track down their accounts. For consumers, the process for reclaiming their money will not change – they simply need to visit their bank or society which will repay them as now.

Some commentators have noted that last year the Treasury Select Committee heard that National Savings & Investments held about £1.3bn in accounts which had not been touched for 15 years or more. This would contribute a great deal towards good causes and there is an argument that, to ensure a level playing field, all institutions in the market should be invited to join the scheme – a point likely to be raised by some during the consultation process.