Free your money from dormant bank accounts
Is your money where you think it is? Most of us have some cash tucked away for a rainy day. But what if when you go to withdraw your money, you discover it's not there any more?
It sounds ridiculous but thanks to banks being increasingly strict with their dormant account policies you may well find that money you thought was there has disappeared. Don't touch your cash for as little as 12 months in some cases, and the bank will declare your account dormant and close it.
What is a dormant account?
A dormant account is a savings or current account that hasn't had any deposits or withdrawals for a long period, a fairly normal situation for many savings accounts. If a bank believes an account has been left to collect cobwebs, in most cases it will send a letter to the last known address of the account holder reminding them of the account and warning them that if they don't respond the account will be closed.
But some banks won't even bother to write if the balance is less than £25. And, they only send one letter before closing the account, so it's easy to be in the dark until you try to access your cash.
"We believe accounts are being closed too quickly and too easily," says Mike Dailly, a member of the Financial Services Consumer Panel (FSCP). The panel acts to represent consumers in the development of policy to regulate financial services. It has become concerned about dormant accounts after some banks shortened the period of inactivity before they start closure proceedings to as little as 12 months. "The banks need to make more effort to get hold of customers before putting dormancy procedures in motion. It shouldn't be a tick-box exercise in order to close accounts."
The reason banks close accounts they believe are dormant is "to protect customers from fraudulent activity", says Adrian Russell, communications manager at Santander. Closing the account "helps prevent fraud and identity theft and safeguards the customer's privacy by not allowing confidential information to go to a potentially old address", says Lauren Jones, senior media relations manager at Halifax.
Some banks are very quick to declare a bank account dormant. For example, HSBC will start taking steps to close one of their current accounts after as little as 12 months of inactivity. But it varies between banks. Barclays and Santander leave accounts alone for five years (although only 18 months for Barclays current accounts), while many others only allow three years. Check with your bank to find out about its own dormant account policy.
If your bank decides it believes your account is dormant and you don't respond to the warning letter, it will close your account and won't contact you again but it won't get rid of your money. At any point you can apply to get your money back. But the inconvenience is in how long it then takes to get your cash. Officially, it shouldn't take longer than an already lengthy 12 weeks but many people report that it has taken them far longer.
If the bank doesn't hear from you for 15 years, then your money is transferred to Reclaim Fund Ltd. This was set up in 2008 and takes money from dormant bank accounts and reinvests it in community projects. But even then you can still reclaim your cash.
If you think your savings or current account may have been declared dormant, the first thing to do is get in touch with your bank. If you have your account number, it should be able to check if your account is still active and help you get hold of your money. And don't forget to make sure you get reimbursed for any interest that should have accumulated on your savings.
You are entitled to any interest that would have been added if the account had remained live. If your bank can't find your old account, go to Mylostaccount.org.uk for help. This website was set up by the British Bankers' Association (BBA) to help people track down dormant bank accounts. Tap in your details, and it will hunt down accounts in your name.
Don't let your bank close your account
Rather than filling out paperwork and jumping through hoops in order to get your own money back, it is far easier to take steps to prevent your account ever being declared dormant. Firstly, always make sure your bank has an up-to-date address for you.
"The bank will not make an account dormant without making an attempt to re-establish contact with the customer," says a BBA spokesperson. If you do get a letter warning that your account will be made dormant, respond immediately.
It is also good practice to check your savings accounts at least once a year. Many savings accounts offer initial interest rates that include a bonus, so after around 12 months your rate of return can plummet, meaning it is time to move your money to a savings account paying a better interest rate.
If you do this once a year and switch accounts at least every couple of years, you shouldn't run into problems with dormancy and you'll always be getting the best interest rate.
It is worth noting that if your money is in a fixed-rate account, it won't be declared dormant during the fixed-rate period.
The FSCP is taking its concerns about dormant accounts to the BBA in the hope of getting the process reviewed. But, for now, it is up to you to keep an eye on your nest egg and make sure it isn't left to fester.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.