Select Committee on Treasury Written Evidence


Memorandum submitted by Stephen Wynn

EXECUTIVE SUMMARY

  The expression "unclaimed assets" puts the onus on investors to claim their assets. They may not realise that they have lost them. There should be an onus on financial companies to keep track of their customers. This is the topic of "lost investors" rather than "unclaimed assets". A Commission on Unclaimed Assets is only looking at one side of the coin. There should arguably also be a Commission on Lost Investors.

    1.  Everyone should have a unique identity number.

    2.  This identity number should be on all the "products" of the financial industry.

    3.  It should be possible for financial companies to find someone's whereabouts from this identity number.

    4.  There should be legislation to require financial companies to use the Letter Forwarding Service if they have lost track of their investors.

1.  The Letter Forwarding Service

  1.1  The Department of Work and Pensions says:

    "DWP provides a letter forwarding service for pension and insurance companies wanting to forward beneficial information to customers, usually about pensions or insurance policies." (www.dwp.gov.uk/cru/lfs.as)

  This does not mention banks or building societies.

  1.2  Personal addresses will be recorded on the new National Identity Register. Perhaps this will be useful for the Letter Forwarding Service of the DWP or the Register could provide its own letter forwarding service.

2.  What is a dormant account?

  2.1  The website of the FSA answered the question:

    "What is a dormant account?

    If an account has not been used for some time (firms may have different definitions, but usually a year), the bank or building society will write to the customer asking them if they want the account to remain open. If contact has been lost, the bank or building society will no longer send out mail and will class the account as "dormant"."

  2.2  There is no mention of the Letter Forwarding Service. Nor is there anywhere on the website of the FSA. This definition of dormant account is no longer there. I made a copy at:

www.comparativetables.com/fsa1.htm. There is however another definition of dormant accounts on the website of the FSA:

    "Check whether you've got any personal savings or current accounts that you haven't used for a while, maybe you've moved home and forgotten to notify your bank—these are known as dormant accounts."

  2.3  The British Bankers' Association also answers the question:

    "What is a dormant account?"

    If you have a personal savings or current account and there have been no transactions (withdrawals or deposits) on it, other than transactions initiated by the bank (such as interest and charges), for a set period (usually at least a year)

    AND

    the bank hasn't heard from you during that time

    THEN:

    The bank will write to you at least once at the last address they hold for you, unless mail has previously been returned from there, to ask if you want to keep the account open.

If the bank receives no reply after a set period, usually between six weeks and three months, your account may be considered "dormant", and the bank will treat your account differently from a "live" account."

  2.4  There is again no mention of the Letter Forwarding Service. Thus a reason for unclaimed accounts seems to be that banks and building societies are not using the Letter Forwarding Service.

3.  Identity numbers

  3.1  If a personal identity number were on all kinds of financial assets, such as bank accounts and life assurance policies, then this number could be used to trace the owners. Everyone will be given a National Identity Registration Number when they register on the National Identity Register.

  3.2  National Insurance numbers are quite often on various "products". An IFA Evan Owen (website: www.ifasok.co.uk), agrees that "NI numbers should be attached to any investment product". He explained in an e-mail:

    "NI Numbers are recorded for anything that has a "tax efficient" status, this includes TESSAS, PEPS, ISAS, Personal Pensions, Executive Pensions, Occupational Pensions, FSAVCs, AVCs, Stakeholder Pensions and the up-and-coming "Sandler Suite" of products. I have also seen NI numbers on Mortgage Endowments, it depends on the insurers and the products concerned."

  The bank and building society accounts, TESSAs, PEPs, ISAs, insurance bonds which I have seen did not contain NI numbers.

  We need a system which is more systematic, at present:

    1.  Everyone does not have a unique NI number.

    2.  They are not on all the "products" of the financial industry.

    3.  Financial companies often lose track of their customers, especially when they move house.

4.  Orphan funds

  4.1  The origin of the orphan funds of life assurance companies seems academic, and opinions differ. They seem to arise largely from policies for which there are no payouts when policies mature, that is unclaimed assets.

  4.2  An article There's £50bn going begging—could any of it be yours? (26th October, 2004 money.guardian.co.uk/savingmoney/story/0,12555,1072006,00.html) implies that all orphan funds come from unclaimed assets. It starts: "Billions of pounds are held in orphan funds, untouched by those entitled to it...".

  4.3  Another article Aviva names adviser to handle orphan assets worth 2.1 bn pounds (3rd February, 2006, http://www.abcmoney.co.uk/news/0320061856.htm) says that orphan funds come entirely from the under-declaration of bonuses:

    "The orphan assets are formed when some of the returns from investments by the insurers are not allocated to policyholders as soon as they are earned."

  4.4  In the US:

    "More than one-quarter of all life insurance policy benefits go unclaimed and unpaid on death of the insured, due to long dormancy periods and because family members aren't always aware a policy exists." (www.missingassets.com/insch.htm)

5.  Finding customers

  5.1  Banks say "we make every effort to find lost customers". They do not even use the Letter Forwarding Service. A contributor to a discussion said:

    "Why doesn't each bank have a web site listing all dormant accounts. Just name, address, branch, date of last transaction. Then at least we could check for old family members. I cannot believe that Banks put much effort into finding the owners of the dormant accounts. Its not in their interest." (boards.fool.co.uk/Message.asp?mid=10368594)

  5.2  This is similar to the suggestion of Cancer Research UK:

    "Cancer Research UK believes that a comprehensive and mandatory unclaimed assets register is required to enable charities to find the assets originally intended for them."

    (http://info.cancerresearchuk.org/publicpolicy/briefings/charity/unclaimedassets)

  5.3  There needs to be legislation to specify what financial companies must do to find lost customers, especially the use of the Letter Forwarding Service.

6.  The distribution and use of unclaimed assets

  6.1  In my opinion unclaimed assets with financial companies should be distributed to the customers of these companies, rather than to charity. Some of the money could be spent setting up a system to ensure that assets are not left unclaimed in future.

January 2007



 
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