A government scheme to use assets from dormant accounts to ‘drive meaningful change’ for communities has exceeded expectations with £1bn worth of funding unlocked. This week it has announced a further £440m is being divided between social causes which break down barriers to work for disadvantaged young people, tackle problem debt, and social investment wholesalers; organisations who connect capital with organisations tackling social issues.
The Dormant Asset Scheme works with the financial services sector to make use of assets banks and pensions funds hold but cannot unite with their owners. The voluntary scheme requires institutions to undertake extensive efforts to re-unite dormant funds with their owners; only when these efforts are exhausted can monies be transferred to the Treasury-backed Reclaim Fund Ltd (RFL), which administrates the funds.
RFL take on liability for the funds and are required to repay them in the event the owner comes forward; and can distribute them to tackle the ‘complex’ social challenges in the UK today say the government. The money must be used to fund social or environmental initiatives but there is no time restriction on it being used within a certain period.
Launched in 2011 the scheme says ‘most’ major high street banks and building societies have already joined delivering £1bn to date. in 2022 the scheme was expanded to incorporate insurance and pensions; investment and wealth management; and securities. Aviva and Legal & General were the first participants in the expanded Scheme, and firms from other expanded sectors are expected to join in 2025.
This week’s announcement sees a further £440m invested into
- £132.5 million for the provision of services, facilities or opportunities to meet the needs of young people
- £132.5 million for the development of individuals’ ability to manage their finances or the improvement of access to personal financial services
- £87.5 million for social investment wholesalers (£12.5 million will reach organisations that support improved youth outcomes); and
- £87.5 million for community wealth funds
There are operational and compliance reasons for taking part in the scheme, not just environmental, social and governance (ESG) say the government. Businesses can reduce their liabilities for historic claims by passing it over the RFL; and clean up their balance sheets while demonstrating compliance with Consumer Duty.
