Richard Godden: Be careful not to lose track of your savings

Under the Dormant Bank and Building Society Act, banks and building societies transfer money held in dormant accounts – those whose money has been untouched for 15 years or more – to a central reclaim fund, for reinvestment in the community.

However, the government set up a centrally-placed “reclaim fund”, which emerged as Reclaim Fund Ltd, a wholly-owned subsidiary of The Co-operative Financial Services (still referred by many as the Co-op Bank). It is non-profit-making and operates independently.

A benchmark is that the Reclaim Fund is operated “in a prudent manner” to ensure it will always hold enough money to meet any claims for the return of savings taken from dormant accounts. So that’s fine then?

Well, yes, to some extent. Most savers do not intentionally allow their accounts to become dormant.

The Co-operative Financial Services says anyone who thinks they may have forgotten about an account can contact their bank or go to www.mylostaccount.org.uk, which provides a free service to help trace lost accounts.

Therefore, while the principle of the Reclaim Fund is that these people will eventually get their money back, it may be prudent to take steps to ensure it is not taken from them in the first place.

This could be achieved, for example, by writing to one’s bank and requesting a “paid up” statement every three or four years to prevent the account becoming dormant.

It is usually harder to identify and recover the dormant accounts of a dead person. It can be more time-consuming and expensive.

Another distinct possibility is that, following the death of the holder, a dormant account may never be recovered – which effectively means all money once held in it will go to the government rather than close relatives or perhaps a favourite charity of the deceased. Inheritance tax at 40 per cent seems benign by comparison.

• Richard Godden is a partner with the law firm McKay Norwell.