Pensions excluded from dormant asset scheme extension

Pensions excluded from dormant asset scheme extension

The government has excluded pensions from its extension of the dormant assets scheme as it believes the pension dashboards will help more people reconnect with their lost pensions.

The government today (February 21) published a consultation outlining plans to expand the dormant assets scheme to other areas of financial services in a move that could unlock hundreds of millions of pounds for good causes across the UK.

A dormant asset/account is one that has had no activity for a long period of time, other than posting interest.

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Under the current scheme, banks and building societies can opt to donate funds to good causes and charities from accounts that have been left untouched for 15 years or more and when the client is no longer contactable.

Since the dormant asset scheme launched in 2011, 30 companies, including all the major high street banks, have joined the scheme and more than £600m has been donated.

But the government is now looking to extend the scheme's remit to cover insurance, investment and wealth management and securities products.

The industry had called for the inclusion of certain pension products that when accessed are turned into cash. This includes defined contribution pensions, income drawdowns, and deferred and guaranteed annuities.

However, pension assets have been excluded from the extension at this time.

The government stated: “Given the significant changes to the pensions landscape in recent years and the government’s commitment to pensions dashboards, it is minded to exclude pensions from an expanded dormant assets scheme at this stage. 

“However, it encourages views on this as part of the consultation process.”

The government said due to changes to automatic enrolment, pension freedoms, and the development of pension dashboards it was hesitant to include pensions in the dormant assets scheme to give these changes time to fully develop.

The government added: “A current priority of the government in the pensions landscape is maintaining the level of trust individuals have in their pension savings, and it believes that these changes need time to fully develop. 

“The government is supporting the pensions sector to implement pensions dashboards, which will enable people to see their pension savings in a single place online. This should make it easier to reconnect with accounts where contact has been lost. 

“In addition, automatic enrolment may drive a shift in wider attitudes towards pension saving as it becomes the norm across the population.”

More than £400m of funds collected via the dormant assets scheme has been used to establish Big Society Capital, an independent financial institution, launched in 2012, with the aim of growing the social investment market in the UK. 

In March 2019, Fair4All Finance was established with an allocation of £55m from the scheme to support the financial wellbeing of vulnerable people. 

It works to increase access to fair, affordable and appropriate financial products and services, working with partners across the private and social sectors.