Guidance

Factsheet one: Bill overview

Updated 24 November 2021

The UK Dormant Assets Scheme was established by the Dormant Bank and Building Society Accounts Act 2008 (the 2008 Act) and is administered by Reclaim Fund Ltd. (RFL).The Scheme was originally predicted to bring in around £400m, but contributions to date have exceeded this by 250%. Over the last decade, more than £800m has been released to social and environmental initiatives across the UK.

The funding is apportioned between England (83.9%), Wales (4.9%), Scotland (8.4%) and Northern Ireland (2.8%), with funding decisions taken at a devolved level.

The Scheme allows responsible businesses to have a positive impact on society and the environment by contributing dormant assets for systemic change.

Expanding the Scheme is crucial to maintaining its substantial impact in the UK whilst supporting industry’s work to reunite more people with their forgotten assets.

1. Key quotes from Ministers

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.

Oliver Dowden, Former Secretary of State for Digital, Culture, Media and Sport

Banks and building-and-loans associations across the UK are working tirelessly to reunite those with forgotten assets. But if this is not possible, it is correct that these funds will be used to address some of the UK’s most pressing social and environmental challenges.

The expansion of the Scheme means that more people will reconnect with their assets, while at the same time making more money available for legitimate purposes.

John Glen, Economic Secretary to the Treasury

2. What does the Bill do?

Delivers on the government’s commitments to enable additional types of dormant assets from the insurance and pensions, investment and wealth management, and securities sectors to be transferred into the Scheme. This has the potential to make around £880 million available across the UK.

Enables the social and environmental focus of the English portion of funds to be set through secondary legislation, in line with the model used in the devolved administrations. This will allow the Scheme to consult on, and respond more flexibly to, changing social and environmental needs in England over time.

Improves the operation of the Scheme, including making reunification efforts a requirement, and makes changes to reflect RFL’s recent establishment as an HM Treasury Non-Departmental Public Body.

3. How does it achieve this?

The Bill:

Enables RFL to accept a wider range of dormant assets, including certain assets in the insurance and pensions, investment and wealth management, and securities sectors.

• Only cash will be transferred into the Scheme: any non-cash assets must first crystallise or be converted to cash before being eligible for transfer.

• Definitions of dormancy and reclaim values have been tailored to asset classes based on market practice and, where relevant and appropriate, existing regulations.

• Owners will always be able to reclaim the full amount owed to them, and the transfer and reclaim process will be tax neutral.

Introduces a new power for the Secretary of State to expand the Scheme in the future to broaden the pool of eligible dormant assets.

Amends the approach for distributing dormant assets funding in England to enable greater flexibility to respond to evolving social and environmental needs over time.

• The Act restricts the English portion of dormant assets funding to youth, financial inclusion, and social investment.

• The Bill enables the current restrictions to be removed from primary legislation, and introduces a measure for defining the way that funds are spent in England via secondary legislation. This aligns with the model currently used in the devolved administrations.

• The Bill maintains the distribution approaches specified in the Act for Wales, Scotland and Northern Ireland.

• The current restrictions of youth, financial inclusion, and social investment will continue until or unless any new arrangements come into force.

• In order to replace or change an Order, the government would be required first to launch a public consultation on the social or environmental focus of the English portion. The Secretary of State must then consult with The National Lottery Community Fund (TNLCF) on the draft of the Order, which is then subject to the draft affirmative procedure.

• The consultation will inform English expenditure only.

Names RFL as the Scheme’s only authorised reclaim fund and guarantees that, should it – or any other authorised reclaim fund – face insolvency, the government can cover its liability for reclaims in the form of a loan.

Introduces a new power for HMT to establish other reclaim funds in the future as appropriate, either in addition to RFL or to replace RFL.

4. Why are we introducing it?

The Bill delivers on the government’s commitment to expand the Scheme following a five year review and public consultation. This included the Blueprint for Expansion report published in 2019 by four senior Industry Champions, representing the banking, insurance and pensions, investment and wealth management, and securities sectors, in which they recommended that the Scheme should be expanded.

The success of the Scheme to date is testament to the commitment and drive of participating banks and building societies that have led the charge on responding to the imperative to put assets lying idle to good use.

Thanks to high participation rates, there are now fewer prospective participants from the banks and building societies sector left to join the Scheme. This, along with improvements in tracing and reunification, means the amount being transferred into the Scheme is reaching a mature state that will stagnate over time without the inclusion of new assets.

Expanding the Scheme means that a broader range of dormant assets will be eligible for transfer which will secure the future distribution and impact of dormant assets funding.

Expanding the Scheme will also shine a spotlight on reuniting owners with their dormant money in a wider range of asset classes, and will continue to protect their right to reclaim their asset at any time. It will also support more organisations to embody responsible business practices, enabling them to unlock more money for social and environmental initiatives without having to maintain the liability for those assets.

Industry has been driving plans to expand the Scheme, working closely with the government to consider how best to do this for the last five years. Industry has been calling on the government to operationalise expansion as soon as possible and we want to maintain this momentum. Industry reports that from a total estimated value of £3.7bn of dormant assets in the insurance and pensions, investment and wealth management, and securities sectors, around £2bn could be reunited with their rightful owners through enhanced tracing and verification efforts. This would leave around £1.7bn available to transfer to RFL.

RFL will continue to reserve a proportion of the money coming into the Scheme so it is able to distribute funds to owners coming forward to reclaim forgotten assets. On this basis, estimates suggest that an expanded Scheme has the potential to make around £880m available for social and environmental initiatives in the UK.

This would further amplify the impact that the current Scheme has had, which has so far included breaking down barriers to work for disadvantaged young people, tackling problem debt, and creating the world’s first social investment wholesaler.

In addition to the estimated £1.7bn initially eligible for transfer into an expanded Scheme, it is expected that further assets will become eligible as they become dormant over time.

5. Who will the Bill apply to?

The legislation will apply to businesses that voluntarily take part in the Scheme.

It will also apply to RFL.

Finally, the Bill also contains provisions that are relevant to The National Lottery Community Fund, and any other organisation tasked with distributing dormant assets funding for social and environmental purposes.

6. Will these measures apply across the United Kingdom?

The Bill extends and applies to the whole of the UK, with the exception of the provision on the distribution of money in England, which extends to the UK but will only apply to England.

7. How much will this cost?

A de minimis impact assessment has been prepared in support of the Bill to assess the costs and benefits of the Bill to businesses and other stakeholders. This concluded that the overall net impact to business resulting from this legislation is estimated to be well below the £5m de minimis threshold.

8. Key Facts and Figures:

The Scheme was originally predicted to bring in around £400m, but contributions have exceeded this by 250%, with more than £1.4bn transferred from dormant accounts over the last decade - of which £800m has been released from the Scheme to support social and environmental initiatives across the UK.

34 banks and building societies are currently participating in the Scheme. This includes major high street names, like Royal Bank of Scotland, Santander, Barclays, and Nationwide Building Society.

RFL currently reserves 40% of the funds that come into the Scheme. Under the current Scheme about 7.5% (£106m) has been reclaimed by customers.

Evidence demonstrates Tracing, Verification and Reunification practices under the current Scheme have improved over time and we would expect the same under the expanded Scheme.

There were 89 responses to the 2020 expansion consultation, representing over 500 organisations and individuals.

Last year £150m was released to support the English spend organisations’ coronavirus response.