Expanding the Dormant Assets Scheme - things are beginning to stir

On 12 May 2021, the Dormant Assets Bill (the Bill) was presented to the house of Lords by Baroness Barran and passed its first reading. A second reading will now be scheduled.

The following day, HM Treasury (HMT) published two related Factsheets, "Bill overview" and "Policy context and background".

What's being proposed?

Under the Bill

• the Dormant Bank and Building Society Accounts Act 2008 (the 2008 Act) would be amended to allow additional types of dormant assets to be transferred into the UK Dormant Assets Scheme (the Scheme), from the insurance and pensions, investment, wealth management, and securities sectors. This could make up to £880 million available across the UK as it recovers from COVID-19

• the social and environmental focus of the English portion of funds to be distributed could be determined through secondary legislation (which is in line with the model already used in Scotland, Wales and Northern Ireland), in turn allowing the Scheme to respond more flexibly to changing social and environmental needs in England

• HMT would be empowered to make regulations for future expansion of the scope of the Scheme to broaden the pool of eligible dormant assets and to establish other reclaim funds in the future as appropriate either in addition to, or instead of, the Scheme's current administrator, the Reclaim Fund Ltd (RFL)

• operation of the Scheme would be improved, including making efforts to reunite the assets with their owner a requirement, and making changes to reflect RFL's recent change of status to become an HMT Non-Departmental Public Body.

Background - what is the Dormant Assets Scheme

The Scheme was established by the 2008 Act.

A dormant asset is a financial product, such as a bank account, that has been open but unused for 15 years, and with which the provider has been unable to reunite the owner.

The government-backed Scheme is led by industry (33 banks and building societies currently take part in the Scheme) and administered by RFL.

Its principal aim is to reunite owners with their financial assets - where this isn't possible, though, the dormant money is used to support important social and environmental initiatives across the UK.

The Scheme was originally predicted to bring in around £400m but contributions to date have been around 250% higher than that. While £105m (or about 7.5%) of the scheme's money has been reclaimed by customers, more than £745m has been released over the past decade to social and environmental initiatives.

In 2020, for example, £150m was released for coronavirus response and recovery across the UK.

Expanding the Scheme

Since 2016, industry has been working with HM Government to consider how best to expand the Scheme. Following the March 2017 report of the Commission on Dormant Assets, HM Government confirmed its support for expansion and asked industry to explore how this would happen in practice.

An Industry Champions' report, 'A Blueprint for expansion', followed in April 2019 which recommended that assets from the insurance and pensions, investment and wealth management, and securities sectors should be included in the Scheme. The Report concluded that this would need primary legislation.

In February 2020, HM Government published a consultation paper on expanding the Scheme. This ran to 16 July 2020 and attracted 89 responses.

In January 2021, HM Government set out its own response - this committed to introducing legislation to enable the expansion of the Scheme, taking into account comments received to the consultation paper.

What happens next?

The Bill has only just started its passage through the Houses of Parliament - the date of its second reading in the House of Lords is yet to be set.

We will, though, be tracking the course of the Bill as it becomes law and will be reporting on key milestones along the way.