British banks are set to hand over several hundred million pounds held in dormant accounts to youth and community charities under plans announced by the government.
Chancellor Gordon Brown said in his pre-budget report that banks and building societies had agreed that unclaimed assets held in accounts will be diverted to help improve youth services and financial education. It said banks could have an option to focus on their local community charities.
Dormant accounts will be defined as those untouched for 15 years.
Banks have not opposed giving the cash to charity but talks in the last two years have centred on how long money needs to have been untouched for it to be considered dormant, with estimates ranging from three years up to 20.
"The decision to base the unclaimed assets scheme on a 15-year definition of dormancy recognises that monies are often reclaimed after an extended period of inactivity, but also that genuinely lost or ownerless assets can usefully be reinvested in the community," said Ian Mullen, chief executive of the British Bankers' Association.
Banks also want to ensure they are not burdened by administration costs and said the proposals should be extended to other savings products, such as NS&I accounts and premium bonds.
Account holders will be able to reclaim cash if they discover money in an account has been handed out.
Estimates of the amount lying dormant vary, although the pre-budget report estimated that several hundred million pounds may currently lie unclaimed.
The Commission on Unclaimed Assets, which was launched last week to review how to deal with savings and other investments that lie untouched for years, said more than five billion pounds could be dormant in UK banks alone, while other estimates have suggested the amount is near one billion pounds.
Building society accounts will also be included. Research last year estimated £50 million-£70 million was considered lost for at least 15 years in their accounts.
"Assets lie unclaimed for a number of reasons," said BSA director general Adrian Coles. "People... sometimes do not keep track of all the accounts they hold and lose touch with their money. Others deposit money, which they do not touch until a rainy day comes along."
Mr Coles said this was especially true for building societies that specialised in savings accounts where people deposited money for long-term safekeeping.
A Treasury spokeswoman said it would be the government, not the banks or building societies, which would decide where the money would go. The priority would be to reunite owners with their assets first.
The Commission on Unclaimed Assets aims to report on the proposals by next June and said it expected the first large-scale delivery of funds by April 2007.
It said its first concern, however, is to return money and accrued interest to account holders wherever possible.
It said that, based on experiences in Ireland and elsewhere, it expected about 60 per cent of money to be returned to account holders. Nicola O'Reilly, policy officer for the National Consumer Council, said there should be a public information campaign so that people knew how to track down unused accounts.
"It's a really good idea to release the money in genuinely dormant accounts and put it to work for the benefit of society. But it is essential that in pursuing this goal the government recognises and allays public fears about ownership and security of their money," she said.