The government will bring forward legislation to increase the number of unclaimed financial assets that can be diverted to good causes, the Department for Digital, Media, Culture and Sport has said.
In an announcement today, it said that an extra £800m would now be available to help support good causes through the coronavirus recovery. However, it was vague about when it is likely to legislate to make this happen, with it expected only when parliamentary time allows.
Dormant assets are financial products that have not been used by the customer for several years, with the provider unable to reunite the customer with their funds. Customers have the right to reclaim their assets at any point.
Under the Dormant Assets Scheme dormant funds from over 30 banks and building societies are held by Reclaim Fund Ltd (RFL), which holds enough money to cover any reclaims while distributing the surplus to The National Lottery Community Fund for social or environmental initiatives across the UK.
Plans to expand the scheme began in 2015
Since the scheme launched in 2011 over £745m from dormant accounts has been used for things like setting up Big Society Capital and the Youth Futures Foundation.
The expanded scheme will include assets from the insurance and pensions, investment and wealth management, and securities sectors.
Plans to expand this scheme were first announced in December 2015 when Nick O'Donohoe was appointed to lead a commission to identify potential unclaimed assets. When O’Donohoe reported back in March 2017, he said that there was potentially up to £2bn available.
In March 2018, the government appointed four industry champions tasked with looking at the insurance and pensions, banking, investment and wealth management, and securities industries, and the blueprint that they produced was published in April 2019.
Last year, the government consulted on changes to the scheme, at which point it decided to remove pensions as asset class to be included in the expansion, but did not have a revised estimate for how much this was likely to reduce the size of the overall pot.
‘Helping to build back stronger’
The charity sector has been calling for the government to use the release of more dormant assets as an opportunity to set up a Community Wealth Fund to support long-term investment in “left-behind” neighbourhoods.
Over 360 civil society, public, and private sector organisations are part of the Community Wealth Fund Alliance that has put forward this proposal.
Today’s announcement does not commit the government to any specific use of the extra funds. It will continue to work with industry, regulators, and Reclaim Fund Ltd to ensure its success.
Last year £150m from the Dormant Assets Scheme was used support charity sector’s coronavirus response.
Oliver Dowden, secretary of state for digital, culture, media and sport, said: “Funds raised through the existing Dormant Assets Scheme have already made a huge difference to vulnerable people and communities across the UK, especially during the pandemic.
“Expanding the scheme will mean hundreds of millions more for good causes, helping us to build back stronger in the years to come.”
Baroness Barran, minister for civil society, added: “Expanding the Dormant Assets Scheme provides us with two positive opportunities to highlight the importance of people tracing their lost financial assets. Firstly it will highlight the potential importance for people to trace their lost financial assets.
“Secondly, where that is not possible, it will release over £800m for social investment that will make a real difference to people - both young and old - experiencing challenging circumstances across the UK as we work hard to recover from this pandemic.”
Shadow minister: 'It does not solve longer term funding issues'
The Labour Party said the government needs to go further to support charities that have lost funding due to the pandemic.
Rachael Maskell, shadow minister for the voluntary sector, said: “Charities are in a desperate situation and have already had to cut vital services, medical research programmes and support as their funds have dried up, so why have the Tories taken so long to respond?
“Giving dormant assets to good causes is long overdue but, although this funding is welcome, it does not solve longer term funding issues.
“Labour has long called on government [to] support charities through this crisis, which have already lost over £10bn in fundraising, trading and investments while demand for their services has increased significantly.”
Charities: Announcement is welcome, but there are immediate issues
Charities welcomed the development and urged the government to work with the sector on the best way to spend the money.
Sarah Vibert, director of membership and engagement at NCVO, said: “The announcement of the long-awaited expansion of dormant assets and the commitment towards good causes is very welcome.
“We’ve always argued that this money should be prioritised on long-term sustainable funding for local communities, through the establishment of a Community Wealth Fund – which remains the best vehicle to help the places with least economic and social capital recover from the pandemic.
“Used wisely, this funding could strengthen communities for years to come, but charities also need support to deal with the immediate challenges caused by the increased spread of the virus, a third lockdown, and the need to mobilise charities and volunteers to support vaccination efforts.”
Matt Whittaker, CEO of Pro Bono Economics, said: “The complexity of releasing the proceeds of dormant shares and life insurance policies should not be underestimated, and this scheme is a great example of government and business working hand in hand to achieve a shared goal.
“The next step must be working in similar partnership with civil society. As the government seeks to 'build back better and 'level up' across communities, it's important that it involves civil society not just in service delivery but in the decision making process too - using the sector's experience and on-the-ground knowledge to help direct these funds to where they can have the greatest impact.”
Roberta Fusco, director of policy and communications at Charity Finance Group, said: “Expansion of dormant assets scheme, though very welcome and long awaited, represents potential and not certainty of extra funds into the sector and will take time to reach communities and civil society organisations in need of support now to continue to respond to Covid-19 crisis. Legislation is needed to enact the changes and important to note that in England, currently expenditure is ring fenced for initiatives focused on youth, financial inclusion or social investment. So, a welcome development, but not an immediate solution to the current financial crisis.”