FCA consults on dormant assets scheme expansion

FCA consults on dormant assets scheme expansion

The Financial Conduct Authority is consulting on changes to its handbook following the expansion of the Dormant Asset Scheme to include insurance policies, pension pots and investments.

Under the scheme, unclaimed assets are released by financial firms to charitable initiatives, but enough money is held back so rightful owners of a dormant asset can reclaim their funds in full at any time.

The dormant assets bill obtained royal assent in February to include five further asset classes within the scheme, alongside the already included money sitting in dormant bank accounts.

Following the bill’s approval, the FCA issued a consultation to firms on May 13 where it asked for the industry’s views on the inclusion of insurance, pension and securities firms.

The scope of the proposals have now been staggered, which means there will be a second consultation on investment assets and client money.

In its first of two consultations - the second to arrive sometime later this year - the regulator said it was not proposing to introduce any additional rules or guidance in relation to record keeping.

Definitions added to the handbook under the scheme included dormant assets relating to a long-term insurance contract, excluding a contract relating to a with-profits policy, as well as pension benefits, with the exclusion of benefits provided from sums invested in with-profits funds.

The regulator also changed a number of instances where the term "account" was used, switching it to "asset". This included an expansion of the Financial Ombudsman Service’s annual general levy.

It proposed to broaden eligibility for the £96mn levy out from deposit acceptors, home finance providers, home finance administrators and dormant account fund operators, to also include “dormant asset fund operators”.

Previously, the Dormant Asset Scheme only covered money in bank accounts deemed "dormant2 - ie, untouched for a minimum of 15 years with an untraceable owner. Banks and building societies could therefore voluntarily channel funds from dormant accounts to the scheme via an authorised reclaim fund.

Expansion of the scheme is tipped to realise some £2.1bn of dormant insurance and pensions sector products. And based on existing reserve estimates, approximately £575mn could be released to social and environmental initiatives as a result.

In a circular sent to asset managers by the Investment Association ahead of the first consultation, firms to be featured in the second consultation were told operational processes and data requirements were being agreed and that terms and conditions were being negotiated.

The Investment Association said earlier this month it had created a tool to re-unite individuals with an estimated £781mn in lost investments. 

The tool is powered by Gretel, a fintech firm which is part of IntelliTeq and which recently launched a finance dashboard to help consumers consolidate products such as pensions and investments.