‘Dormant’ money to fund charities
This month a series of changes have been introduced to the Reclaim Fund scheme, that will effectively allow the redistribution of ‘dormant’ money from different financial institutions to charities from next year.
The Reclaim Fund is perhaps more commonly known to distribute dormant bank and building society savings accounts; however the recent changes now mean that the fund will start targeting insurance assets, collective scheme investments, pension benefits and shares in FTSE-listed companies from early next year. After the changes go through, the fund is expected to collect up to £880m combined from lost and forgotten accounts that fall under these new categories.
Why are these changes important?
The Reclaim Fund was set up in 2011 in order to redistribute money from ‘dormant’ accounts to institutions where it can be put to better use. Much of the money that is redistributed from these accounts is used altruistically, with £880m of the £1.6bn collected over the last 11 years, being donated to charitable institutions.
This is important because it promotes charitable enterprise by using money that would otherwise be sitting in forgotten accounts doing nothing, not least as moving dormant money means moving money away from the banks who are likely paying little or no interest. For example, of the £880m allocated for charitable institutions so far, £425m has been used to establish the independent financial institution Big Society Capital. This institution’s purpose is to connect social enterprises and charities that want to borrow money by bringing in investors with a genuine desire to deliver positive social change. This kind of altruistic funding would not be possible without the Reclaim Fund.
What is considered ‘dormant’?
Generally, accounts become lost because the owner has left a small amount of money in them and then forgotten about it. The most common case of this is during house moves, where the owner doesn’t tell their bank or building society about the move and then forgets they have an account tied to that address.
Up until now, any money sitting in accounts that have not been accessed for 15 years will be eligible for redistribution. With the new changes to the Reclaim Fund, this grace period could be as low as 12 years for some of the new categories.
If my money has been claimed, can I get it back?
Before you panic, it’s important to remember that even in these cases, every attempt will be made to find and contact the account holder before any money is claimed by the fund. Generally, the amount claimed is a small amount, with the average found in dormant accounts being only £100.
Alongside this, if the account holder remembers that they have an old account and finds the funds have been claimed by the Reclaim Fund, they can still get it back. If you have found funds missing in an old account, give your bank a call and the money will be refunded under the Reclaim Fund’s policy. Since 2011, the fund has returned £100m to banks.
If you’re looking to locate a lost or dormant account, the first stage is to speak to your provider for more information or you can try the mylostaccount service.
The Private Office is an award-winning team of independent, Chartered Financial Planning experts working together to protect and grow your wealth. If you’re looking for financial advice, why not give us a call on 0333 323 9065 or book a free no-commitment initial consultation with one of our chartered advisers to find out how can help.