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05 June 2005 - "The Chancellor wants to get his hands on Unclaimed Assets to use them for charitable purposes"
With the pensions sector in turmoil and over 65,000 victims of pensions wind-ups facing uncertainty where better to look for an easy solution than the estimated £15bn of Unclaimed Assets in the UK financial sector.

In the financial sector there are a myriad of different assets that have become either "Dormant" or "Inactive" and are estimated to have a value in excess of £15bn. In March 2004 the estimated amount unclaimed in National Savings & Investment Products alone stood at £33.6m. In addition to the straightforward savings related products there are considerable amounts of money in assets such as Unclaimed Shares, Unclaimed Dividends, Dissentient Share Registers and Pension Contributions.

The large-scale demutualisation activity in the late 1990's of Building Societies such as Halifax, Alliance & Leicester, Northern Rock, Bradford & Bingley and Woolwich created a new generation of share ownership. However, not all potential shareholders claimed their entitlement at the time and as a consequence there is somewhere in the region of £500m in Unclaimed Shares & Dividends still waiting to be claimed.

One major retailer recently identified that within their company pension scheme there were 27,000 ex employees entitled to a refund of contributions but whom they had lost contact with.

Legislation
At present there is nothing on the statute books that compels organisations to take the moral high ground and actively try to trace stakeholders and reunite them with their assets.

However, as has been seen in Canada, USA, Australia and more recently Ireland new legislation has been introduced to transfer Unclaimed Assets from companies to the state. It is therefore conceivable that with the amounts involved and the dilemmas facing government that UK legislation on this issue is not far away.

You only have to review Hansard to see the frequency with which the issue of Unclaimed Assets is being debated. On the 22nd February 2005 the following extract highlights the mood of parliament: "That is why we revert again to our policy on the use of unclaimed assets and the £15 billion of unclaimed assets reliably estimated to exist in this country. Ireland began by simply taking the interest on those unclaimed assets. Of course, we would require various safeguards as part of our policy to ensure fairness. The Treasury is already well advanced on that process, but for different reasons. The Chancellor wants to get his hands on unclaimed assets to use them for charitable purposes." This issue has been debated for over 2 years now in the UK parliament but the frequency of debates on the subject have increased and whilst the Chancellor has requested a voluntary approach by the financial sector his patience will no doubt run out and strict rules will be introduced if there is not the desired response. When legislation was introduced in Ireland a proactive campaign was undertaken to contact account holders and half of them (15 million) confirmed they were aware of the account and did not want the money to be moved.

Moral High / Low Ground
Whilst the BSA and BBA both run free services to assist stakeholders in tracing accounts that are either inactive or dormant this requires a conscious act on the part of the stakeholder. However, due to the passage of time and the changing UK demographics several thousands of accounts will be in the names of deceased customers and many others who have moved house both at home and abroad.

In a recent press release one of the main agencies used by banks and building societies claimed to have reunited stakeholders with nearly £6m since 2000.This is in sharp contrast to the £20m reunited with stakeholders over the last 12 months by The Shareholder Partnership.

Should it really be down to the individual to come forward or is there more that could be done by the financial institutes in the UK to proactively trace and reunite stakeholders with their entitlements?

Clearly with the growing political pressure as a result of failing pension schemes there will be an increased emphasis on the Chancellor to find a way to access the £15bn to ease the burden. Consequently, it is more advantageous for financial organisations; in particular, to take a far more proactive approach in advance of any legally imposed position.

This proactive approach is already being driven within the Unclaimed Shares, Dividends and Dissentient Register arena, where on several schemes up to 70% of "missing" stakeholders have been traced and encouraged to claim their entitlement. Already millions of pounds have been handed back to stakeholders or their beneficiaries. In addition companies have seen a reduction in their Registrar costs of administering their Share Register and several charities have benefited greatly from the donation option provided within these types of programmes.

Reactivate or Lose
In the last decade the banking and savings markets have become increasingly competitive with aggressive interest rate strategies and the introduction of new delivery channels. This has also impacted heavily on customer loyalty resulting in literally millions of "Dormant" or "Gone Away" accounts.

With the cost of attracting new customers increasing there has to be a benefit to financial organisations to consider a proactive tracing campaign aimed at reactivating these existing account holders. By using specialist agencies to trace and reactivate account holders there is the additional benefit that product cross selling could once again make the relationship profitable for all concerned.

As political pressure mounts there has to be a distinct advantage to organisations to go on the offensive and limit the amount of money taken for government use. In addition there are significant brand reputation benefits to be gained from "doing the right thing" as well as possibly helping charities where customers elect to donate their investment.