The Government has announced a major expansion of its dormant assets scheme in a bid to boost economic recovery as a result of the coronavirus pandemic.
This expansion will help communities unlock up to £800m in ‘dormant’ assets that are currently help in pensions, insurance contracts and investments.
Funds raised from the scheme will support social investment, environmental initiatives and other good causes to support those across the UK.
This expansion comes after a four-year review and public consultation into the current dormant assets scheme, which covers bank and building society accounts.
The Department for Digital, Culture, Media and Sport said the responses showed widespread support for expanding the scheme to include pension and investment assets.
Since 2011 30 banks and building societies have participated in this scheme, enabling over £745m to be released. This money has to have been ‘inactive’ for over 15 years to qualify.
Of these funds, £150m was unlocked in May last year to support the UK’s charity and voluntary sectors in response to the Covid crisis.
The government said the scheme will continue to prioritise consumer protection with a focus on locating and reuniting people with these financial assets.
This announcement was broadly welcomed by the pensions industry.AJ Bell senior analyst Tom Selby says: “An estimated 1.6 million retirement pots representing £19.4 billion 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.”
He says that by including pension and investments assets the Dormant Assets Scheme’s financial war chest could be boosted to the tune of £800 million.
“This is money that could make a meaningful difference to the lives of thousands of people struggling through the pandemic.”
He adds though that it is important to make clear that this is not a pensions raid of any sort. 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.”