Government officials have recently announced that they plan to expand the Dormant Assets Scheme currently in place. The scheme applies presently to dormant account at banks and building societies, but under new regulations will be extended to pension policies, investments, and shares. This is something that may impact older people who have been putting into pension schemes for many years.
Legislative processes will have to be completed before any changes can be implemented. As yet, there is no firm date as to when the money from dormant pensions and investments will be released. However, government officials believe that it could raise more than £800 million for communities across the UK.
The current dormant assets scheme
The current Dormant Assets Scheme has been in place since 2011 and has helped raise £745 million for communities and charities. The money is distributed from accounts where there has been no activity for 15 years. After this time, the account passes over to the Reclaim Fund for further investigation before the money is released and distributed.
Under the current scheme, companies must make every effort to contact account holders before the money is released. In addition, should the account holder ever make contact about their account, any money must be returned. It has been confirmed that the same rules will apply to the extended scheme involving pensions and investments.
It is unknown how long the inactive period will be, with some experts saying that it could differ across various assets. The dormant period on savings and bank accounts is 15 years, but it may not be the same for pensions and investments.
Raising more money for communities
The Secretary of State for Digital, Culture, Media and Sport, Oliver Dowden, said that the Dormant Assets Scheme had already made a huge difference to charities and communities over the past decade.
In a recent press release on the GOV.UK website, he stated, “Funds raised through the existing Dormant Assets Scheme have already made a huge difference to vulnerable people and communities across the UK, especially during the pandemic.”
Dowden added that the scheme's expansion would result in a considerable boost in funding to help worthy causes.
The insurance industry agreed that the expansion could be beneficial, as it would help free up assets within the pensions and insurance sectors. A senior official from the Association of British Insurers (ABI) said that a lot of time is currently spent trying to locate policyholders, often with no success. This then leads to accounts sitting dormant for many years.
The ABI added that distributing the money from these dormant accounts and policies would prove invaluable in helping communities and charities. Given the Covid-19 pandemic's impact on many communities and good causes, the additional funding could be a financial lifeline for some.