Treasury plans to raid more of our dormant accounts
Forgotten pensions and investments are now being targeted
Plans to extend the rules that let the government raid dormant accounts could see a wide range of other financial sources targeted.
Some £2bn could be raised for good causes, on top of the £600m taken from dormant bank and building society accounts since 2011.
Under current rules, if an account has been untouched for 15 years and the product provider has been unable to track down the customer, a bank or building society can transfer the funds to a central pot to be redistributed to good causes.
Thirty firms, including all the UK’s major high street banks, now voluntarily transfer such funds under the dormant assets scheme. Insurance, securities, and a wide range of other investments are now set to be absorbed by the scheme to dramatically increase the amount of cash available to charities.
“The dormant assets scheme is making a real difference to people across the nation,” says minister for civil society, Baroness Barran. “This includes helping to tackle youth unemployment, addressing financial exclusion and growing the social investment market.
“That’s why we are now seeking views on expanding the scheme to include even more unclaimed assets, in a way that continues to protect customers whilst potentially unlocking millions more pounds for good causes.”
To date, the money has been used to support organisations including the Youth Futures Foundation, which was allocated £90m to help unemployed, disadvantaged young people secure jobs by providing funding and advice to youth employment charities. The foundation also works with employers and businesses to provide jobs alongside crucial personal support.
Other projects include investment in Big Society Capital, supporting around 2,000 vulnerable people to move into appropriate housing, 26,000 disadvantaged young people to benefit from job and training opportunities and 250,000 people to live in a home with access to community energy.
However, the government has stressed that reuniting customers with their money will remain a priority for the entire scheme.
“Only where this is not possible, following rigorous, unsuccessful efforts to locate the asset owner, will funds be released to support good causes,” this week’s announcement stated.
If at a later date a consumer discovers that they had a dormant account and their funds have been transferred into the scheme, they will always be able reclaim the full amount transferred.
And while a wide range of investments are included in the expansion plans, recent massive changes to the pensions landscape in recent years and the upcoming launch of pensions dashboards – designed to help working taxpayers get a handle on their retirement savings and projected old age income – means the inclusion of lost pension pots in the scheme is up for discussion.
The consultation process will now throw open the doors for input from the financial industry.
But some warn that more focus should be placed on ensuring consumers don’t lose track of their money in the first place.
“For people that have spent 20, 30 or even 40 years in employment, accumulating a number of different pensions and investments over that time, this means that any ‘forgotten’ products that have been dormant for over 15 years could be at risk of being swept up by the government,” says Richard Pearson, director at Selftrade. “While it does use the money for charitable causes, leaving money dormant for so long shouldn’t happen in the first place.
“And while anyone who subsequently discovers their cash has been taken will eventually be able to get it back, this should still serve as a wakeup call to anyone who thinks they might have money languishing in an old account. There are a number of ways consumers can track dormant products, so it’s vital that people review their accounts, check whether their investments are still worthwhile and consider consolidating old pensions into a SIPP [self-invested personal pension] to ensure their money is working as hard as it can.”
One of those who has recovered a lost pension is Lee Garside, 37, from South Derbyshire. He knew he had been paying into a pension since 2002 but had no idea what it was worth.
“I had originally planned to opt out,” he says. “I was more focused on my immediate financial needs and
only staying in because of the length of the paperwork to opt out! I got caught up in automatic enrolment and didn’t think much more about it. If I had to guess, I would have thought there was about £10,000 in there, but it wasn’t until I changed jobs last year that it occurred to me to track it down.
“It wasn’t difficult to find and I was shocked to find there was £27,000 in there. Finding the money has made me much more engaged with my retirement savings. I now save almost £150 a month by default and top it up by two or three hundred pounds whenever I can.
“I feel like I’ve lost five or six years of investing because I just didn’t think about it, but now I’m really enjoying learning about it and getting the most I can out of it.”
Lee now manages his pension savings through Moneybox.
Track down lost savings accounts, investments and pensions for free online via the banking industry’s tool, My Lost Account and the government’s pension tracing service.