Forgotten Bank Accounts
It has just been announced that a fund of 8.9 million has been set up to help tackle youth unemployment in Scotland.
While this is no doubt an admirable development, it does seem reasonable to ask from where the money is coming given the ongoing pressure on public sector finances?
The answer is that the authorities have turned their attention to the savings of the dead and the disappeared. In other words, the Young Start Fund, and similar initiatives, will partly be paid for through money lying in dormant bank and building society accounts.
Having looked at similar schemes in other countries, the then Labour Government set the project in motion with the Dormant Bank and Building Society Act in November 2008. This enabled banks and building societies to transfer money held in dormant accounts to a central reclaim fund, for reinvestment in the community. Accounts are classified as dormant when the money has been untouched by consumers for a period of 15 years or more.
In May 2010, the Government announced its intention to channel money from these 'dormant accounts' into a Big Society Bank, whose purpose was to provide new finance for neighbourhood groups, charities, social enterprises and other non-governmental bodies.
Fortunately, this will not - or should not - lead to money being permanently lost by savers. Rather than take savings held in dormant accounts directly from banks and building societies, the government made moves to set up a centrally placed 'reclaim fund'. The result was Reclaim Fund Ltd, which is a wholly owned subsidiary of The Co-operative Financial Services (still referred by many people as the Co-op Bank). It is non-profit-making and operates independently with an appointed board and executive.
A benchmark is that the Reclaim Fund will be operated "in a prudent manner" to ensure that, no matter the number of donations made to worthy causes, it will always hold sufficient levels of money to meet any claims for the return of savings taken from dormant accounts. One assumes this is based on actuarial estimations of the annual aggregate value of likely claims from people who were unaware their savings had been taken - and now want their money back.
"Banks and building societies will then interact with Reclaim Fund to claim back money needed to re-unify customers with their dormant balances," according to The Co-operative Financial Services.
So that's fine then?
Well, yes, to some extent. Most savers do not intentionally allow their accounts to become dormant and it may come as a surprise to know that these may eventually disappear from the bank or building society where they were originally lodged.
The Co-operative Financial Services says that anyone who thinks they may have forgotten about an account can start the ball rolling by contacting their bank or building society or logging on to www.mylostaccount.org.uk which provides a free service to help trace lost accounts. Therefore, while the principle of the Reclaim Fund is that these people will eventually get their money back, it may be prudent to take steps to ensure that it is not taken from them in the first place. This could be achieved, for example, by writing to one's bank and requesting a 'paid up' statement every three or four years; a simple process that would prevent the account becoming dormant.
One particularly good reason for not allowing bank accounts to become dormant is the potential difficulties that can arise should the account holder die. For obvious reasons it is usually much more difficult to identify and recover the dormant accounts of a dead person than those from someone who is still alive. It can be a lot more time-consuming, and therefore expensive too, as a result of higher legal charges for executry work, which of course reduces the net value of the estate.
Another distinct possibility is that, following the death of the holder, a dormant account may never be recovered - which effectively means that all money once held in it will go to the government rather than close relatives or perhaps a favourite charity of the deceased.
by: Richard Godden
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