Dormant accounts - Brown's raid

ReportInvestor

The Chancellor is looking to have savings accounts closed after three years if there is no activity on the account. This will cause endless headaches, mistakes and red tape; it will translate into extra costs at the expense of savers.

The Building Societies Association is against it. Public opinion thinks it is ridiculous - 81% in one survey say nothing should happen before ten years are up.

Should MSE have a vote on when an account should be recognised as "dormant"? Should MSE join in the campaign to stop Gordon?

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A real cynic might even say that it gives Gordon a chance for a bit of bank bashing to divert attention at just the time that MPs will be looking at the judgement in the Railtrack case.

Gordon wants charities to benefit, but not from "lost/dormant" accounts at National Savings or unpaid gilts :rolleyes:. Frank Field would like the money, if taken, to be used to pay those whose company pension schemes have been wound up.

nrsql

Hope this doesn't apply to ISAs.
Guess I''l have to do a 1p annual standing order to my deposit a/c's.

cjn_2

Interesting. As circumstances change, I often move my money around but I'd prefer to keep accounts open (with £1) than shut them.

That way, if things change I can shuffle money back into them without having to go through the hassle of reopening, and potentially all the trouble of proving my identity again (i.e. for money laundering purposes).

Now, I'll have to make sure to add a penny each year.

If the problem is people depositing their money and forgetting about it (!), why not have a system of banks having to write to people after a certain period of time, where such balances are significant (eg. over £100).

ManAtHome

Depends what they mean by 'no activity' - adding interest is an activity...

isasmurf

ReportInvestor wrote:

The Chancellor is looking to have savings accounts closed after three years if there is no activity on the account. This will cause endless headaches, mistakes and red tape; it will translate into extra costs at the expense of savers.

Now lets define "no activity". A dormant account, which this applies to is defined as follows:

If there are no transactions (other than those initiated by the bank/building society) after a period of time (*) than the bank/building society writes to the account holder. If the bank/building society does not get a reply the account is considered dormant.

(*)For banks this is 1 year, for building societies 3 years. An ISA is considered dormant if no deposits are made during a single tax year.

Banks will then include this money as profit in the balance sheet. Something which MSE'ers are always complaining about. Now the Government want to remove this from banks profit sheets and give it to Charity, you start complaining. You can't have it both ways, either the banks profit from these dormant accounts or not. Money in dormant accounts is always reclaimable by the account holder.

Although I admit 3 years is perhaps too short a time period, but on the other hand if you don't tell the bank where you live then it's your own problem.

ReportInvestor

I suppose members of MSE rarely keep the same account for more than 6 months anyway, Isasmurf :rotfl:.

But the loss of funds under management & added bureaucracy will lower savings rates fractionally. MSEers do seem more interested in fractions than the average saver .

Re your helpful definition of terms and its implications. How many people will be just too busy to reply, or simply throw the critical "this is your last chance to contact us" letter into the bin without opening it, thinking it's (yet another) rip-off loan offer from their bank?

I am not confident that Gordon's proposal will actually reduce, rather than increase, the number of future "lost accounts" (as opposed to dormant accounts). It is not his real aim. But I think that this is how Gordon will present his case - as a public service.

nrsql wrote:

Hope this doesn't apply to ISAs

A key point. The government hasn't yet got its head around the fact that we might use a different mini-cash ISA provider each year. ISAs will have to treated differently. Unless this is a sneaky move by Gordon to force us to reduce our tax free savings :eek: since it is illegal to add to old ISAs.

nrsql wrote:

Guess I''l have to do a 1p annual standing order to my deposit a/c's.

That's not a bad precaution. It also reminds you which accounts you have and you'll get an instant reminder if some bank does close your account without your permission. Another way of doing this is to get interest payments paid into another bank account. Will this qualify as keeping the account active? It is a transaction that was initiated by the saver (not the Bank/BS) in year 1, if not in year 3.

But this is all the sort of frustratring extra bureaucracy and unnecessary/uneconomic activity that often results from our tinkering Chancellor's initiatives.

brm_2

Money in dormant accounts is always reclaimable by the account holder.

I do hope this rule remains the same in the UK.

You don't have that luxury in NZ.
They close the account and you have no ablity to re-claim your money if you miss the reminder.

Perhaps this is where Brown is coming from.

deemy2004

brm wrote:

I do hope this rule remains the same in the UK.

You don't have that luxury in NZ.
They close the account and you have no ablity to re-claim your money if you miss the reminder.

Perhaps this is where Brown is coming from.

Eh ?

You lose the capital or the interest ?
If its the capital thats STEALING !

brm_2

deemy2004 wrote:

Eh ?

You lose the capital or the interest ?
If its the capital thats STEALING !

You lose the lot!!

ReportInvestor

Losing interest from the start of year 4 may not be theft in the strict legal sense of the term. But it will feel like it after inflation has taken its toll on your capital .

Thanks to brm for identifying a possible "slippery slope" which future governments might exploit.

brm_2

deemy2004 wrote:

Eh ?

You lose the capital or the interest ?
If its the capital thats STEALING !

I think the word you were looking for is "tantamount" to stealing.
Anyway, you lose the lot.
You have no recourse.