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In December 2005, the Treasury reached an historic agreement with the UK banking sector on the issue of unclaimed assets. A 15 year definition for dormancy was proposed - the point at which funds could legitimately be used for other purposes. It was also suggested that the funds, once released, should be focused on engaging young people, financial education and inclusion and community regeneration. Agreement was reached on a major new campaign to re-unite account holders with their funds, coupled with a further commitment that account holders will always be able to get their money back with interest at any point in the future. Assessments vary on how much money is actually left in dormant bank and building society accounts, but estimates start from several hundred million pounds upwards, which could be increased by the unclaimed assets of other financial institutions such as insurance companies and National Savings.
The Commission was set up at the initiative of the Scarman Trust, drawing together a group of experts from the banking, finance, consumer protection and third sectors. This group, together with government observers, sought to examine the challenges arising from the proposed plan. It brought outside expertise to inform our analysis of the main topics. We reviewed international precedents and received reports from the financing, accounting and third sectors.
We considered three main issues: reuniting customers with their money and consumer protection (working with the National Consumer Council); the transfer of unclaimed assets to a new entity; and the best use of unclaimed assets, which has been the major focus of our work.
We reviewed the scale and depth of deprivation in the UK and thought hard about how best to address the problems facing society today. The UK has enjoyed a long period of sustained growth, yet many people have been left behind. The acceleration in growth has created increasing gaps between rich and poor. Poverty has become more concentrated, and inequalities in wealth and income more marked. Some of the UK's poorest urban and rural areas have become no-go areas for investment.
Government and third sector interventions are vital, but without enterprise and wealth creation we cannot build resilient and sustainable communities and individuals. In a consultation paper published in July 2006 it recommended the establishment of a Social Investment Bank that would help put the third sector on a more robust financial and professional footing. The final report, published in March 2007, draws on the subsequent, wide-ranging consultation to both provide a fuller account of the Commission's findings on third sector needs, and on how a Social Investment Bank might meet them - as well as to provide a blueprint for the institution's funding, goals and governance.
In parallel, a British Bankers Association (BBA) and Building Societies Association (BSA)-organised industry working group are developing proposals for a regulatory and legislative framework on dormant accounts, in consultation with the Government. This is still a work in progress. The Commission is continuing to review these proposals and will focus on three main issues:
- Consumer protection: Account holders must always be able to claim their assets, including any interest due, regardless of when they come forward to claim them.
- Effective regulation: The proposed regulatory framework needs to be sufficiently robust to ensure compliance without placing an unnecessarily onerous administrative burden on financial institutions.
- Unrestricted capital: Whilst any transferred capital would be subject to a future claim by account holders, the capital should be free of other ties so that it can be used to leverage other resources for disadvantaged communities.
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