An announcement is expected today on a reversal of previous Labor Government policy to deem bank accounts and life insurance policies ‘inactive’ after three years of nil transactions.
The so-called ‘three-year’ rule meant the account balances would be transferred to the Australian Securities and Investments Commission (ASIC) if the account had not been accessed for three years. This was changed, from the previous period of seven years, by the Labor Government in 2013. The move will cost the Abbott Government about $550 million. Mr. Abbott has stated that:
“This caused real financial distress for many Australians, including older Australians and community groups who were not able to access their own funds when they needed them.”
The monies held by ASIC could, of course, be claimed back by the account holders, but it is claimed that this has been a time consuming business. Children’s accounts are to be exempt under the new legislation.
Those who believe they may have had monies reclaimed by the government under the three-year rule can search for their funds here.
Finally we have a legislative initiative that gives rather than takes. But whilst the intent sounds noble, the result may just be more money for the banks.
When the then Labor Government introduced this legislation in May 2013, we described it as a dumb regulation and we remain of the same opinion. In essence, it was penny-pinching for no real gain. The amount the government gained was, at most, $600 million, but the inconvenience caused to thousands of Australians with low balance accounts was massive.
The interesting point, however, is that those who will now be able to maintain inactive accounts for four, five or more years will probably seriously erode their own savings by continuing to pay bank fees on their balances. At least when the money was transferred to ASIC, as annoying as it was to retrieve it, the over-the-top fees were on hold, so your balance remained fairly stable. And given our record low interest rates, savers have not been penalised by a lack of earnings. Strangely, the main winners from this reversal of Labor legislation would seem to be the big banks.
What do you think? Is it better to have inactive accounts called in and held in the relatively ‘safe’ ASIC environment? Or should they be allowed to lie dormant for twice as long, while being slugged with bank fees? Can you suggest a third, more equitable, way for the government to deal with inactive accounts?