Dormant bank accounts could go to charity

FT.com 16/09/2006

Hundreds of millions of pounds in high street bank accounts that have lain dormant for 10 years or more could be passed to charity under plans being drawn up by the Treasury.

After months of negotiations with the financial services industry, the Treasury is believed to be close to an agreement that would re-direct unused money to the voluntary sector.

Gordon Brown, the chancellor, is expected to announce details of his proposals in the pre-Budget report this autumn.

The amount of money in dormant accounts could be as much as £2bn, although estimates vary depending on the definition of inactivity.

The Treasury's plans to tackle dormant accounts are controversial. Opposition politicians have voiced concern that ministers could re-direct the money to the government's own coffers. Consumer groups are worried that the Treasury could decide accounts were dormant after only three years of inactivity and have campaigned for a longer period.

While talks with banks and building societies are continuing, ministers are more likely to settle on a period of about 10 or even 15 years as is the case in Ireland when defining whether an account is neglected, according to Whitehall insiders.

Treasury officials have visited Dublin twice to examine an Irish initiative for re-directing the money from dormant accounts to charities.

Mr Brown, who wants to make more use of voluntary organisations to complement services provided by the state and private sectors, wants assets held in inactive accounts to be re-invested in society. He is keen for the financial services industry to do more to reunite account holders with their money as a first step.

Among the options being considered by the Treasury is the creation of a national register of unclaimed assets. Banks and building societies have their own tracing schemes but the success rate is low.

The government could also decide to copy the Irish model, under which an endowment fund re-distributes money to charitable causes and takes a proportion of what is held in dormant accounts each year.

Mr Brown's proposals are expected to include safeguards for account holders who want to reclaim their money. People would not lose the entitlement to what was in their accounts.