UK Commons Committee Reports on 'Unclaimed Assets'

A House of Commons Treasury Select Committee has backed a UK Government plan to use unclaimed money in dormant bank accounts to fund projects such as youth centres and wants the scheme to be compulsory for all financial institutions.

So far the UK Government’s draft legislation only provides for a voluntary scheme for banks.

In its report to Government the Commons Committee says if the UK continues along the road of a voluntary scheme, it will be out of step with every other comparable countries like Australia.

In its recommendations it says a compulsory scheme has the overwhelming advantage of guaranteeing fairness and consistency between institutions and it urges the UK Government to reconsider the voluntary basis of its proposals.

The report recommends that the forthcoming legislation be prepared so as to include reserve powers for Ministers to establish a compulsory scheme at a later date without recourse to further primary legislation, should a voluntary scheme prove unsuccessful.

Between £400 million and £500 million is said to be currently held in dormant bank and building society accounts in the UK where, for whatever reason, a financial institution has lost contact with an account holder.

The UK Government wants to put money that has been left untouched in bank accounts for 15 years into creating a Social Investment Bank to distribute funds towards worthwhile charitable causes and in particular youth services.

The report says that by choosing youth services and financial capability and inclusion as the primary recipients of funds, the Government will miss an ideal opportunity to improve the financial strength of the third sector.

The Committee says there is a clear need for a Social Investment Bank, the establishment of which relies heavily on it receiving significant funding through unclaimed assets.

It says it is disappointed at the lack of public consultation on the priorities for disbursement.

The National Housing Federation has recommended the money should also be used to fund affordable credit and banking services for those worse off in the community.

In its submission to the Treasury’s Commission on Unclaimed Assets, the Federation has identified a way of making cheap loans and a range of other financial services available to low income families nationwide.

In Australia unclaimed monies are return to Federal Government coffers after seven years. Currently, unclaimed funds are handled by ASIC, the Australian Securities and Investments Commission. ASIC holds unclaimed amounts of money transferred from banks, credit unions, building societies and companies. This money is transferred to the Commonwealth Government if the account has not been used for over seven years and contains $500 or more.