In the pre-Budget Report the chancellor announced further details on plans to give dormant account monies to good causes.
These proposals were first mooted in the 2004 budget and since then the industry has held constructive discussions with the Treasury on a number of complex issues.
Adrian Coles, director-general of the Building Societies Association, says: The BSA is determined to ensure that as much money as possible is reunited with customers.
“If a scheme is considered necessary to deal with the remainder, it is important that a realistic definition of dormancy is used and that smaller institutions are able to support local charities.
“We are pleased the Government has taken these points on board. However, much of the detail still needs to be resolved and we will be looking to work constructively with the Treasury on issues such as identifying unclaimed assets.
Assets lie unclaimed for a number of reasons. People lead ever busier lives and sometimes do not keep track of all the accounts they hold and lose touch with their money. Others deposit money, which they do not touch until a rainy day comes along.
“Therefore it is important to recognise the distinction between accounts that are lost and those that are merely dormant. In the case of the former, accounts where mail is returned as addressee unknown, are flagged to stop confidential account information being sent out.
“Where the account is merely dormant, the person knows perfectly well where their money is, but has not touched it. This is especially the case for building societies, which specialise in savings accounts, where people deposit money for long term safe keeping.
The proposed 15-year definition for unclaimed assets is very sensible. The longer the timescale, the greater the likelihood that these accounts are genuinely lost, rather than merely untouched.
Coles adds: Many societies have a policy of making charitable donations to help the communities from where their members are drawn, rather than centrally based organisations. After all, charitable donations are drawn from members money.
“Regional societies will want to continue to ensure their local communities are helped by charitable donations.
“Therefore the chancellors commitment that locally-based financial institutions will be able to focus on the needs of the communities in which they operate is a step forward and we look forward to working with the Treasury on what this will mean for building societies.
There is a difference between accounts which are dormant and those which are lost. Many people use building societies to keep their long-term savings safe.
“Their account may be dormant in that they have not carried out any transactions for a while, but they active relationship on another account such as an instant access savings account, mortgage or AGM voting. It is essential that money in these accounts is not required to be paid over to charity since it is not lost.
Coles says: It is not clear whether membership rights would be retained if the account money is taken off a building societies balance sheet. The legality of taking members money out of an institution, and what happens to that membership needs to be properly worked through.
“As mutual organisations, building society lost account money is used collectively for the benefit of all members of the society, funding good value mortgages, which currently allow 2.5 million people to purchase their own home.
The starting point for all of these negotiations is rightly the need to ensure that people are reunited with the money, which belongs to them. To this end the BSA has recently launched its revamped lost savings leaflet, which is an easy one-stop process for people to trace any building society savings with which they have lost touch.
In order to maximise the amount of money being given to young people and financial education, we would urge the government to rethink the decision not to involve national savings and investments in the discussion on unclaimed assets.
“During a recent Treasury Select Committee hearing, representatives from NS&I told MPs that 1.8bn was currently in dormant accounts, with 25m in unclaimed Premium Bonds.