The Financial Inclusion Centre has made a submmission to the Government’s consultation on the English portion of the Dormant Assets funding (for a description of the Dormant Assets Scheme, see below). So far over £800 million has been committed through the scheme to support social and environmental initiatives across the UK. Now, a further £880 million is expected to be unlocked – £738 million of that in England.
The Financial Inclusion Centre argues that financial inclusion should definitely remain a cause for the Dormant Assets Scheme. Overall, limited progress has been made in promoting financial inclusion and resilience in the UK.
To be fair, as a result of legislation and regulation, real progress has been made in two areas. The number of people without a basic bank account has been significantly reduced (although concerns have been raised about ‘cash deserts’ emerging across the UK as banks close branches). Moreover, millions of people are now contributing to a pension as a result of pensions autoenrolment (although more needs to be done to increase the amount people are saving for retirement and improve pension provision for groups such as the self-employed, workers in the gig economy, and carers).
But, very limited progress has been made towards achieving the other main goals of financial inclusion and resilience – that is, building savings; expanding access to affordable, socially useful credit and insurance; and meeting the need for advice and support on financial issues.
The failure to build financial inclusion and resilience has meant that financially vulnerable households and individuals have been exposed to ongoing financial problems such as being unable to pay for essentials such as household bills or emergency needs such as replacing basic goods such as a cooker.
Financially vulnerable households can be caught in a vicious cycle. Low levels of savings, lack of insurance, or affordable and accessible credit options to cover emergency costs contributes to over-indebtedness and/ or forces households to turn to damaging high cost/short term credit. This in turn makes it harder to save against future needs – and so on.
Households have been left seriously exposed to the wider economic shocks created by recurring crises (the 2008 financial crisis, the economic crisis caused by Covid, and most recently the cost of living crisis).
Financially vulnerable individuals can find their independence and life choices restricted due to lack of resources and viable options, often trapping them in dangerous circumstances. Financial exclusion and vulnerability, and associated money worries, contributes to wider social problems such as poor mental and physical health, family breakdown, and undermining workplace productivity.
Particular groups in society, including those with protected characteristics, are still disproportionately affected by chronic, serious levels of financial exclusion.
In our submission we said the priorities for the Dormant Assets Scheme is to support interventions to:
- Help vulnerable households build savings to create a financial cushion;
- Promote access to affordable credit;
- Promote access to affordable, basic insurance; and
- Expand access to advice, support, and information including debt advice, and help with navigating financial and social security systems (a cause of financial hardship and therefore exclusion is the difficulty many people face trying to navigate social security systems).
We make the point that there is no shortage of good, innovative products and ideas for promoting financial inclusion and resilience. But, the problem is that many of the best ideas and initiatives have been ‘left on the shelf’. The priority now is to make sure these products and ideas reach as many excluded or underserved people as possible.
Similarly, we believe that a much more proactive approach should be adopted to take emergency and pre-emptive support, advice, and information to those who need it, rather than rely on those in need finding their way to charities that provide support.
There needs to be a focus on turning ideas into action. The submission can be found here: Financial Inclusion Centre Dormant_Assets_Spend_Consultation FINAL
What is the Dormant Assets Scheme?
Dormant assets are financial assets, such as bank accounts, that have been untouched for a long period perhaps because owners have simply forgotten about them, or moved house and not informed their bank. Rather than continue to let those assets lie dormant in banks, the Government set up The Dormant Assets Scheme.
The main aim of the Scheme is to reunite people with these financial assets. But, where this is not possible, the Scheme unlocks this money for social and environmental initiatives across the UK. So far over £800m has been committed to support social and environmental initiatives across the UK. The money is split between England, Scotland, Wales and Northern Ireland, and each nation makes its own decisions on how the money is spent.
The Dormant Assets Scheme was recently expanded from bank accounts to include the insurance and pensions, investment and wealth management, and securities sectors. This is estimated to unlock around £880 million for good causes across the UK, £738 million of which will be made available for England over time.