Pensions will be included in the government’s extension of the dormant assets scheme, despite previous concerns that life savings should be excluded due to ‘significant change’ in recent years.
The government has announced that dormant assets across the insurance and pensions, investment, wealth management, and securities sectors are to be unlocked, with more than £800m made available to support the UK as it recovers from the coronavirus pandemic.
The expansion of the dormant assets scheme marks the completion of a four year review which showed widespread support to include assets from these sectors.
A dormant asset/account is one that has had no activity for a long period of time, other than posting interest.
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.
Assets which now form part of the scheme include:
- Proceeds of dormant life insurance and retirement income policies;
- Proceeds of dormant shares or units in collective investments;
- Dormant investment asset distributions and proceeds;
- Proceeds of, or distributions from, dormant shares; and
- Unclaimed proceeds from corporate actions.
However, under the scheme rules, individuals are still able to reclaim their assets in full at any time.
Early last year (February 2020), the government said pensions would be excluded from the scheme given the “significant changes” to the pensions landscape in recent years and its commitment to the pensions dashboard, which it wanted to give time to develop.
But Tom Selby, senior analyst at AJ Bell, welcomed the government’s latest change of plan saying the extra money could be used for good causes.
Mr Selby said: “An estimated 1.6m retirement pots representing £19.4bn of assets could be classified as ‘lost’ in the UK. While the industry’s priority must remain reuniting these pots with their owners, there are various circumstances where this simply won’t be possible and the assets become dormant.
“Where this is the case – and particularly given the strains placed on millions of people by coronavirus – it makes sense to put that cash to good use.”
However, he added this was not a pensions raid of any sort.
He said: “Those who hold a policy which is used as part of the dormant assets scheme will always be able to claim their funds back, no matter how long it has been deemed dormant.”
Since the dormant asset scheme launched in 2011, 30 companies, including all the major high street banks, have joined the scheme and more than £754m has been donated.
This money has been used to support initiatives which aim to tackle financial exclusion, grow the social investment market, and support renewable energy solutions.
John Glen, economic secretary to the Treasury, said: “Banks and building societies across the UK are working tirelessly to reunite people with forgotten assets. But on occasions where this isn’t possible, it’s right that these funds are used to tackle some of the UK’s most pressing social and environmental challenges.
“The expansion of the scheme will mean more people are reconnected with their assets, whilst also making more money available for good causes.”