Tim Worstall

Unclaimed Assets Bill

Dizzy’s found the Unclaimed Assets Bill. Not happy with it at all.

It’s part of a long running story: what happens to orphan bank accounts and life insurance policies and the like? The proposal is that after 15 years they get shunted into a special charitable account and then spent for the benefit of the community (or some such).

Some of the wilder worries, which I’ll admit I had at first, have been dealt with. The bank has to at least try and find you if you haven’t used the account for those 15 years. If they don’t and you pop up again demanding to know where your money is you do get it back.

The current situation is that such accounts just carry on, possibly for ever: and the money becomes part of the bank’s float.

I seem to remember that the original suggestion was that 5 years would be the limit: perhaps 15 isn’t the correct one either. But at some point there needs to be a clean up of such accounts: imagine what it would be like if someone who died intestate, with no heirs, meant that their property could never be touched? A house for example: we’d have rotting buildings all over the place. I believe I’m right in saying that such go directly to the Treasury: the entire estates of those without wills or heirs.

As I say, I’m not sure whether the current proposed rules are actually the right ones, but some rules are indeed necessary.

In

5 responses

  1. Unity Avatar
    Unity

    Yes, you’re correct Tim. Intestate estates with no heirs or will to transfer to the Treasury.
    This is actually no more than the application of an old common law doctrine – escheat – and the government’s proposals for orphaned bank accounts and insurance policies are, equally, little than the formal application of that same principle to the financial services sector.
    Strictly speaking the Treasury could do this now without the legislation by serving writs, and the only the entirely prohibitive costs in time and resources of tracing these accounts and serving/processing the writs that serves as a barrier.
    As long as the regulations are reasonable in terms of timescales, the amount of effort that banks are required to put in to trace owners and such escheats remaining revocable there’s nothing fundamentally wrong with this proposal. The only thing I’m not keen on is this business of designating the recovered fund for unspecified ‘community benefit’.
    There’s a fair old sum of capital tied up in these abandoned accounts that could be put to very good use in support of the development of credit unions, which often struggle get off the ground due to time and effort required to build up sufficient capital reserves to make them viable. That plus some well thought out deregulation – credit unions, like cooperatives, are horribly over-regulated at the outset – could make this policy a real winner in terms of tackling poverty.

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  2. dizzy Avatar
    dizzy

    The problem remains a philosophical one for me. There is, at the base of this, the assumption that the state is greater than the property of its individuals, and the state can be the ultimate arbiter of property ownership. That is wrong.
    How about a business driven method? how about banks offering people accounts where the conditions they accept are that if they disappear for 50 years never to be seen again and the bank establishes them as dead and with no heirs, then they, from beyond the grave through contract with the bank give the bank authorisation to dispose of the money through some scheme.
    That is more palettable than having the Government simply assume ownership of assets.

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  3. Unity Avatar
    Unity

    The thing is Dizzy, there’s more to this than simply the individual vs the state.
    Remember, what happens in practice that these orphaned accounts get quietly shuffled off by the banks on to the lowest possible rate of interest while the bank, itself, profits on the use of this money as an investment float with a return far in excess of that which an owner will realise if they do show up to claim the dormant account.
    To rework your car analogy slightly, the bit you’ve missed out of the equation is the fact that while you’re storing it you keep the petrol tank full but turn a blind eye to your next door neighbour nipping in every few weeks to siphon the tank.
    If what we’re looking for is the most equitable solution for all parties then your options are limited either to imposing additional regulations on the banks, compelling them to maintain a minimum level of return on these accounts for the owner relative to base rates and their existing package of interest-giving accounts – which would force the banks to actively administer these account and increase their costs – or you make these Treasury escheats revokable up to a set period of time and subject to a fair rate of interest if they’re claimed.
    Under such a scheme, this ceases to be a straight transfer of assets and become, instead, a loan, albeit one that the Treasury would not have to repay if the debt is not called in within a fixed period.
    Take the latter option and your next key decision is what to do with the money accrued by the treasury from these dormant accounts, etc, which is currently estimated to be around £15 billion, plus you’ll have year on year accruals as other dormant accounts cross over the 15 year threshold.
    That’s where the real debate should be, how best to use the money while the government has it and what would make for the best investment of these funds, which is where I’ve suggested using the money to float credit unions and an option that could provide both social and economic benefits in the medium-long term by helping people at the bottom take a step or two up the economic ladder without relying on welfare benefits.

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  4. dizzy Avatar
    dizzy

    Unity, you;re still putting forward the argument that the Treasury has some sort of right to this money. It doesn’t.

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  5. Unity Avatar
    Unity

    Actually, Dizzy, it does.
    One of the functions of the state is to serve as custodian/trustee of the commons and property that falls out of individual ownership, as happens in case of intestacy where no heir can be found, reverts to the commons.
    In practice such property has, since Norman times, tended to be appropriated by the Crown, but the underlying principle that property without an owner is common property dates back to Anglo-Saxon law, which is why that principle is broadly recognised in the common law.

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