Let’s put unclaimed money to good use

Is unclaimed money an opportunity to help #buildbackbetter? Why not put unclaimed money to work for the benefit of the community in Aotearoa New Zealand?

Unclaimed money is money left untouched by its owner in organisations like banks, or with a person such as a solicitor. Examples include unpaid wages, proceeds of life insurance policies or lotto tickets with unclaimed winnings (IRD).

In New Zealand, unclaimed money is transferred to the Treasury, Inland Revenue or Public Trust. In November 2019, there was an estimated $199M of funds being left to hang dry (Hon Stuart Nash). These funds are simply held on behalf of potential claimants. Why not follow the lead of other countries and put the funds to good use?

Last year, Inland Revenue undertook a review of unclaimed money, following which, on 26 June 2020, the Minister of Revenue issued a supplementary order paper to the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill proposing to reduce the period of time before money is deemed “unclaimed” from up to 25 years to 5.3 The proposed change would have effect from 1 April 2021. However, the Government’s review was limited and missed an important discussion about how unclaimed money could be put to better use.

Submissions on the bill closed on 12 August 2020 and the Select Committee’s report is due on 4 March 2021. It is important that Government actually consider the question of how best to use unclaimed money as the changes go through Parliament.

Overseas, there are many examples of unclaimed money being used for the benefit of the community. In the United Kingdom (UK), the Dormant Bank and Building Society Accounts Act 2008 was introduced with the dual purpose of returning unclaimed money to its rightful owner, while also distributing it for the “benefit of the community”. Big Society Capital in the UK was launched in April 2012 with a significant proportion of its funds coming from unclaimed money sources. Big Social Capital is the leading financial institution dedicated to social impact in the UK. Working in partnership and with co-investment, it invests in a number of projects to create a better, sustainable future. For example, nearly 1,000 homes have been provided to help families through Big Society Capital.

In Canada, British Columbia also has a programme to divert funds to community projects. Since 2004, more than $38M has been transferred to the Vancouver Foundation to address social issues, including reducing homelessness and helping young adults transition out of foster care (BCUPS). In December 2016, Japan’s Parliament passed the Dormant Deposit Utilisation Act, opening the way for approximately USD $500M sitting in bank accounts that have been inactive for 10 or more years to be given to a newly formed non-profit group and utilised to finance social welfare activities (Wall Street Journal).

Some states in the United States use interest on unclaimed property funds to pay for college scholarships for students across the state (NAUPA). In Australia, key people in the sector are calling for investment of unclaimed money into social causes. For example, Rosemary Addis, co-founder of Impact Investing Australia, has referred to unclaimed assets as potential capital for a social impact fund (Impact Investing Australia).

A summary of some overseas initiatives follows:

United Kingdom

• A total of £425m has been distributed to Big Society Capital, attracting significant co-investment and making well over ₤1.9bn available for 5,000+ charities and social enterprises (BSC Impact Report).

Ireland

• In November 2019, the Dormant Accounts Action Plan 2020 was announced, to provide funding of over €45 million to help address disadvantage across Ireland, including social inclusion, homelessness, assisting migrants, support for carers and promoting inclusion in sports (Minister Seán Canney).

Canada

• In British Columbia, more than $38M has been transferred to the Vancouver Foundation to address social issues, including reducing homelessness and helping young adults transition out of foster care (BCUPS). The Vancouver Foundation recently used some of the funds to establish the Community Response Fund which provides grants to charities in BC that provide health, social services, arts, culture and community benefits that have been impacted by Covid-19 (BCUPS). New Brunswick has an unclaimed property program that will launch shortly (CBC News). In 2016, the Canadian Centre for Impact Investing released a report recommending “unclaimed assets, invested right, could grow Canada’s impact investment market, leveraging private capital to solve our most pressing social and environmental problems”.

United States

• In some states, the interest on unclaimed property funds pays for college scholarships. A 2014 report recommended that “further research should be undertaken to demonstrate how states can use unclaimed assets to create public good, and how the Treasury can support states to build innovative funds with these assets” (US Impact Investing).

Australia

• Impact Investing Australia are advocating for a wholesaler similar to Big Society Capital (Impact Capital Australia) to be established.

Japan

• The Dormant Deposit Utilisation Act 2016 opens the way for approximately USD $500M sitting in dormant bank accounts to be utilised to finance social welfare activities (Wall Street Journal).

We recommend that New Zealand similarly put its unclaimed property to good use. Invested right, unclaimed money could grow our impact investment market and allow it to be invested in charities seeking to solve some of our most pressing social and environmental problems. In the wake of Covid-19, let’s not miss this opportunity: rather than leaving unclaimed funds to languish, let’s put unclaimed money to good use for the benefit of all of us.