40: The Dormant Assets Act 2022 – what does it mean for charities?
The Dormant Assets Bill received royal assent on 24 February 2022. The new Act significantly increases the scope of the existing Dormant Assets Scheme, with the potential to double the assets which may be made available to charities.
What is the Dormant Assets Scheme?
The Scheme, which was set up after legislation was enacted in 2008, distributes funds from ‘dormant assets’, currently funds held in banks and building societies which have been left unused or unclaimed for fifteen years or more, to good causes. So far, around £800 million has been made available for use by charities and social enterprises.
Although the assets are ‘dormant’, they still belong to someone. It is core to the Scheme that the rightful owner should always be entitled to retrieve their money regardless of how long it has been dormant. The financial institutions which opt in to the Scheme are expected to try to trace, verify and reunite assets with the rightful owner in line with industry best practice before transferring funds into the Scheme. This is important because the institution’s liability to repay the rightful owner passes to the Scheme once the funds are transferred.
What happens to funds involved in the Scheme?
Funds released to the Scheme are transferred to Reclaim Fund Ltd (RFL), a not for profit company which is owned by the Treasury and regulated by the FCA. RFL operates the Scheme as the authorised reclaim fund by handling claims from owners of dormant assets and handing surplus funds to the National Lottery Community Fund for onward distribution. From there, funds are apportioned between the 4 nations of the UK and distributed to charities and social enterprises.
Under the current Scheme, dormant assets must be used for a ‘social or environmental purpose’. In England, there is a further requirement that the funds be directed to youth projects, financial inclusion or social investment. Organisations which have been allocated funds to date include Big Society Capital, Youth Futures Foundation and Fair4All Finance.
What changes will the Dormant Assets Act make?
After more than ten years of operation, significantly fewer funds had been going through the Scheme each year. The Government appointed a commission to advise on expanding the Scheme to incorporate other sources of ‘lost’ money, resulting in what is now the Dormant Assets Act.
The Act will (among other things) significantly expand what may be ‘dormant assets’ under the Scheme to include assets from the insurance, investments and wealth management, securities and pensions sectors. New definitions of dormancy are provided for each type of asset and there is provision for the list to be expanded in future. It is estimated that this new expansion will open up a further £880 million to be released for good causes.
The Act also provides for the Government to consult on introducing more flexibility on the causes for which Scheme funds may be used in England (more in line with the devolved nations). The consultation is anticipated to take place in Summer 2022 and looks to further bolster the impact of the Scheme.
What impact will the Act have for charities?
Since it was introduced, the Scheme has been hugely successful in channelling unused funds to a range of good causes, while retaining the owner’s rights to their funds.
The Scheme’s expansion should build on that success, while also introducing some more flexibility in the selected causes which may benefit. It has political backing, as it is expected to support the Government’s ‘Levelling Up’ White Paper which focuses on enhancing the availability of opportunities and prosperity of all areas of the UK.