Dormant Accounts

What is a dormant bank account?

In general terms a bank or building society account will be considered dormant (by the bank or building society) after long periods of inactivity (meaning there have been no transactions such as withdrawals or deposits). The duration of inactivity does vary between each institution according to their own terms of business, anywhere between 3 and 15 years. Note that there is now a statutory period of 15 years before the ‘Big Society Bank’ rules apply — see below.

Savings accounts, including matured savings plans such as fixed-term bonds, can be left inactive for longer periods of time before being considered inactive.

Why do dormant accounts exist?

It is often the case that the bank or building society and the account holder have become separated for one reason or another. Many people forget about, or lose track of ‘small’ deposits of money in bank and building society accounts. Despite the efforts that each bank or building society may make to reunite these funds with their owners (again, this can vary widely between institutions), dormant accounts continue to build up within the banking system.

What do the banks do in these circumstances? Account holders can become disconnected from their accounts for a number of reasons, but typically:

The account holder moves house within the UK or abroad
The account holder gets married or divorced
The account holder passes away
Individuals can simply forget, or lose track of, deposits they hold in bank and building society accounts

What do the banks do in these circumstances?

Prior to an account reaching dormant status, the institution will usually send letters to the last known address of their customer, enquiring as to whether they wish to keep their account(s) open. This correspondence is typically sent after a year of inactivity on a current account (three years for a savings account).

If the letter is received and a reply sent stating that the customer wishes to keep the account open, the bank or building society will continue to treat the account as ‘live’, sending statements and other correspondence in the normal way. If the bank or building society receives no reply after a set period (usually between six weeks and three months) however, the account will typically be considered dormant, and the bank or building society will treat it differently from that point onward. This is partly to protect their customers against fraud and identity theft, and partly to safeguard customer privacy by not allowing confidential information to go to an old address.

Once considered dormant, the bank or building society will retain a record of the account for a limited time, regardless of what happens to the funds held within it.

What happens to the money in a dormant account?

The funds in a dormant account remain the property of the account holder, or someone who has a legal claim on the account if the owner is deceased (plus any interest due if it was an interest-bearing account).

However, due to recent changes in legislation, all funds considered ‘unclaimed’ (statutorily, after at least 15 years of inactivity) may now legally be requisitioned for use either by a duly appointed charitable body, or transferred into a central government-sponsored fund, often referred to as the ‘Big Society Bank’.

The ‘Big Society Bank’

Managed by Co-operative Financial Services, the ‘Big Society Bank’ utilises its requisitioned funds for good causes that benefit the community. The term ‘Big Society Bank’ is used to refer to the Dormant Bank and Building Society Accounts Act 2008, which came into legal force on 1st February 2011, and is intended to enable balances held in dormant bank accounts to be ‘reinvested for the benefit of the community’. It should be noted that the Act enables banks to pass the money that they hold in such accounts on a voluntary basis, and so at this time, many dormant accounts remain unaffected.

Importantly, the customer’s right to claim the money in their dormant account is entirely unaffected, even if it has been re-invested for the benefit of the community following these recent changes. Each institution will need to have taken out an insurance policy that covers them in case the rightful owner or their living heirs come forward to make a claim anytime in the future.

How do I claim the funds from an unclaimed dormant account?

The British Bankers Association has recently launched a free service called ‘my lost account’ with which you may carry out a search. If you believe you have a dormant account then this is a good place to start. If however you are not aware of the dormant account, or the account in the name of someone who has passed away and you are one of the beneficiaries, the easiest way for you to accomplish would be to use services such as ours.

It should be noted firstly that not all the people we contact are owners or beneficiaries (i.e. you may be contacted in the process of tracing the individuals that are entitled). If you are (one of) the individual(s) we believe is entitled to the money in a dormant account however, we will help you take the steps necessary to reunite you with your unclaimed entitlement(s) relatively quickly and easily, as we will be working closely with the bank or building society in question.

For enquiries, contact our Resources Manager, David Amblin on +44 (0) 20 8914 8317 or email direct d.amblin@treethorpe.com