Insight: Unlocking Dormant Cash

It is estimated that between £3bn and £5bn is lying inactive in UK bank and building society accounts – and the government is to make it available to charities from 2009.

In December 2005 the Treasury reached an agreement with the UK banking sector on the issue of unclaimed assets. A 15-year definition of dormancy was proposed, after which period funds could legitimately be used for other purposes. The Dormant Accounts Bill was published last November. It will enable unclaimed assets from dormant bank and building society accounts, where there has been no customer activity for 15 years, to be reinvested into the community.

Unclaimed assets do not belong to the Government or the banks and the key priority is to reunite it with its owners. However, where this does not prove possible, banks and building societies should not continue to benefit from these monies and should transfer the money so that the maximum amount can be reinvested into society.

This will affect the charity sector in two ways…

Accumulated dormant funds will be distributed to the third sector

The Big Lottery Fund has been identified as the most suitable body to distribute this money across the UK. In England the focus of these resources will be on funding youth services that are responsive to the needs of young people, followed by financial capability and inclusion. If resources permit, and subject to clarifying and addressing any state aid implications, the Government would also like to see a proportion of unclaimed assets in England used to develop the social investment market and to contribute to the long-term sustainability of the third sector, by strengthening existing finance providers. The devolved administrations of Scotland, Wales and Northern Ireland will determine, through consultation, their own priorities for distribution which reflect the needs of communities in each country. It is hoped that the distribution of funds will be operational at some point during 2009.

Legacies

Efforts have been made to unlock dormant funds in the UK for decades. These efforts have remained limited until now. It is therefore expected that the majority of unclaimed assets will have belonged to people who have now died. One in seven of all people who die leaving a valid will, leave money to charity. On average five percent of a person’s total estate is bequeathed to organisations like your own. In total, legacies form thirty per cent of all voluntary income in the UK. When a person dies leaving a will, the executor of that will and the person’s next of kin may not have access to all of the relevant paperwork and other items relating to certain assets when arranging the person’s affairs. As a result, assets such as old bank accounts and shareholdings belonging to the deceased person can go unclaimed. If a person dies leaving undiscovered assets in this way, and has left a percentage of their estate to charity in their will, then the chosen charities receive a percentage of an incomplete estate, and miss out on their percentage of the value of any unclaimed assets. The Unclaimed Assets Charity Coalition believes that hundreds of millions of pounds of funds could be being held by financial institutions in the UK that are, in fact, owed to charities as lost legacy income from unclaimed assets.

What do I need to do?

  • Check the Tarnside website to keep up to date.
  • Keep abreast of The Dormant Bank and Building Society Bill. The second reading of this Bill is due to take place on 6 October 2008. www.hm-treasury.gov.uk.
  • Ensure that you have a robust system in place for legacies, which will allow you to react efficiently and reclaim any unclaimed assets due to your charity.
  • Ensure that all relevant staff and trustees are made aware of the proposed developments and potential future funds which may become available so that you make the most of this opportunity.

(October 2008)