Dormant Assets Act 2022

Policy background

The Dormant Assets Scheme

4. The Dormant Assets Scheme is led by industry and backed by the Government with the aim of reuniting people with their assets. Where this is not possible, the Scheme enables this money to support social and environmental purposes across the United Kingdom. In the first ten years of its operation, the Scheme has released over £800 million.
5. The Scheme is underpinned by the following principles:
   1. reunification first: participants' first priority is to reunite owners with their assets;
   2. full restitution: dormant assets owners are able, at any point, to reclaim the amount that would have been due to them had a transfer into the Scheme not occurred; and
   3. voluntary participation: industry participation in the Scheme is voluntary.
6. The 2008 Act enables participating banks and building societies to voluntarily transfer funds from dormant accounts which cannot be reunited with their owners to an authorised reclaim fund. A transfer and agency agreement (TAA) is held between Reclaim Fund Ltd (RFL) and the bank or building society, and establishes a contractual framework between the two parties. The TAA outlines the operational arrangements for transfers and reclaims, and includes further details of participants' obligations to undertake reunification efforts prior to transferring eligible assets into the Scheme.
7. RFL manages the funds, retaining enough to meet any future reclaims, and distributing the surplus to The National Lottery Community Fund (TNLCF). TNLCF in turn makes these funds available for social and environmental purposes across the United Kingdom, in accordance with the provisions of the 2008 Act, any relevant secondary legislation, and any directions given in each of the four nations. Dormant assets funding is used to fund projects, or aspects of projects, for which funds would be unlikely to be made available by a Government department of a devolved administration. This is known as the principle of additionality.
8. The 2008 Act also provides for an alternative scheme, available to small banks and building societies. This enables firms with balance sheets below £7 billion to transfer dormant assets funds to RFL and nominate a local or aligned charity to receive the surplus. The alternative scheme is maintained but not expanded in the Act. To date, the alternative scheme has two participants.

Scheme expansion

9. From 2016, industry worked with the Government to consider how best to expand the Scheme. In 2017, the Commission on Dormant Assets reported on the potential to include a wider range of asset classes. 1 In 2018, the Government confirmed its support for Scheme expansion and asked industry to explore how this would work in practice.
10. Four senior Industry Champions took this forward, publishing their report in April 2019. 2 This made recommendations to industry, the Government, and regulators on broadening the Scheme to include assets from the insurance and pensions, investment and wealth management, and securities sectors.
11. Building on this, the Government launched a public consultation in February 2020 to gather views on the proposed approach to expansion. 3 The Government's response to the consultation was published in January 2021 and committed to introducing legislation to enable Scheme expansion. Responses to the consultation informed the development of the Act.
12. The expanded Scheme functions in a similar manner to the pre-existing Scheme with a participant being required to sign a TAA with RFL before transferring money to it. Such an agreement gives RFL the flexibility to tailor certain provisions to the assets in question, ensuring that the relevant consumer protection efforts – including tracing, verification, and reunification – are made.
13. For funds that cannot be reunited with owners, despite these efforts, Scheme expansion is estimated to unlock £880 million over the next ten years for social and environmental purposes across the United Kingdom. 4

Classification of Reclaim Fund Ltd (RFL) as a public body

14. As specified in the 2008 Act, a reclaim fund is responsible for receiving dormant assets funds from participants, managing the reserves to meet customer reclaims, and making surplus funds available to TNLCF to be spent on social or environmental purposes.
15. RFL was established in 2010 by the Co-operative Banking Group (renamed Angel Square Investments Ltd) and (at the time of writing) is the only authorised reclaim fund in the United Kingdom. Following a decision by the Office for National Statistics to classify RFL to the central Government subsector, RFL has been established as a Non-Departmental Public Body (NDPB) of the Treasury, operating at arm's length from the Government. RFL continues to manage the Scheme in an open and transparent way, governed by a separate board of directors.
16. RFL's funds remain separate from central Government funds, and the Treasury does not have access to dormant assets money. Surplus funds continue to be transferred to TNLCF for distribution in accordance with legislation.
17. The Act reflects RFL's establishment as a NDPB of the Treasury and names it as the Scheme's only authorised reclaim fund. It also includes a power for the Treasury to designate additional authorised reclaim funds in the future.

Changing the model for distributing dormant assets funding in England

18. The 2008 Act provides that all dormant assets money must be used to fund initiatives which have a social or environmental purpose. 5
19. Funds are apportioned by TNLCF to each nation in the United Kingdom according to the Distribution of Dormant Account Money (Apportionment) Order 2011 (SI 2011/1799), based on the Barnett formula.
20. The 2008 Act restricted funding allocations in England further to youth, financial inclusion, and social investment. The other three nations do not have restrictions in primary legislation; instead, the relevant ministers have the power to set the particular purposes and recipients of their allocations through secondary legislation.
21. Within the boundaries of the 2008 Act and any such secondary legislation, each nation has powers to issue broad policy directions to TNLCF on how to allocate their portion of the funding. The Secretary of State has the power to issue policy directions to TNLCF specifying the purposes for which the English portion may be distributed. To date, TNLCF has channelled funding in England through four specialist dormant assets-funded organisations, overseen by an independent Oversight Trust. 6
22. Following policy directions from the Secretary of State, TNLCF has created funding agreements with each organisation in order to distribute funds, which are then drawn down by the organisations on the basis of need. There is no set time limit to these funds, which enables these independent organisations to take a long-term view of the challenges they exist to tackle.
23. In response to calls from the public to review these causes, the Act amends the approach to restrictions in England to allow the Government to respond to public feedback and evolving social and environmental needs by setting the causes through secondary legislation, which is subject to public consultation and parliamentary approval.
24. The first consultation launched under this Act must include youth, financial inclusion, and social investment as options to consider. It must also consult on an option to distribute funds to community wealth funds: a fund that provides long-term financial support to communities for the provision of social infrastructure.
25. No further changes, other than consequential amendments, have been made to Part 2 of the 2008 Act.