Savers who have lost track of pension and investment funds will have their money used for charitable causes that could aid Covid recovery efforts under government plans to expand its dormant asset scheme beyond bank accounts.
The Reclaim Fund was established in 2011 to distribute the cash from bank and building society accounts that were left unclaimed for at least 15 years. It came after banks were accused of bolstering their balance sheets by sitting on dormant savings.
About 30 banks and building societies take part in the scheme, but the new programme will open to City firms across the insurance, pensions, investment and wealth management sectors after the government puts forward legislation to expand it.
Each sector will have their own guidelines determining when assets should be shifted to the Reclaim Fund.
Firms are expected to make reasonable efforts to track down customers and reunite them with their accounts before transferring them to the Reclaim Fund, which has so far distributed £745m to charitable causes.
However, only a small proportion of deposits are ever recovered by their rightful owners after they are transferred, at a rate of just 5% a year.
In total, customers have only reclaimed £93m since the fund was established, which is less than 7% of the £1.35bn collected over the same period and lower than the £147m transferred in 2019 alone.
The Department for Digital, Culture, Media and Sport (took the decision after a four-year review concluded there was widespread support for the scheme’s extension.
It said customers would still be able to apply to reclaim their assets in full at any time, and said the expanded scheme “will have consumer protection at its heart, with the priority continuing to be locating and reuniting people with their financial assets”.
The voluntary scheme has run into controversy. Earlier this year, the Guardian revealed that HSBC had been warned by its own compliance staff in 2017 that it was not doing enough to reunite customers with their cash before freezing their accounts, and was potentially harming elderly and vulnerable savers who may have lost track of their savings.
HSBC denied it had mistreated customers, or that it took insufficient action, and said it had made “substantial and continuous improvements” to its dormant account policy since 2016.