The government’s move to transfer cash from inactive accounts in which banks cannot find the owner to Treasury coffers has highlighted the need to watch your savings.
Australia is not Cyprus, but the new rules applying from May 31 2013 have the potential to affect thousands of deposit holders who fail to properly manage their investments.
Under the new policy, funds from some accounts that have had no withdrawals or transfers for the past three or more years, and where the account holder is uncontactable, will be transferred to the Australian Securities and Investments Commission (ASIC). Previously, bank accounts could remain inactive for up to seven years.
According to the government, “hundreds of thousands of Australians” already have unclaimed money in bank accounts held by ASIC and in lost superannuation held by the Australian Taxation Office.1
Banks have reportedly told customers to make transactions of as little as a dollar to ensure their accounts are not caught up in the rule change. Interest payments, fees and charges are not considered transactions for the government’s purposes.
Australian Bankers Association chief executive Steven Munchenberg warned that the process of reclaiming the money from ASIC could take months, with those unaware facing the prospect of having their account frozen and funds seized.2
With RaboDirect’s recent survey showing nearly half of all working Australians have less than one months’ savings in the bank, the new policy shows the importance of not only actively managing savings, but also ensuring they earn a high return.
“Aussies are losing out on billions of lost interest by leaving their money in low interest accounts,” says RaboDirect’s Greg McAweeney. “Take the first step by moving excess money from your transaction account into a high interest savings account.”
He suggests starting with a regular and realistic savings plan of as little as $5 a week and gradually building it up.
The RaboDirect National Savings and Debt Barometer indicates that regular savers enjoy higher levels of happiness, health and a sense of greater control over their financial destiny. As shown by the recent scenes in Europe, the fear of governments dipping into individual savings can cause major social upheaval.
Getting your money back
On the plus side, the government has promised to pay interest at the rate of the consumer price index on the unclaimed moneys, instead of such funds being eroded by “fees, charges and inflation”.
Inactive bank accounts and life insurance policies will be listed on MoneySmart after three years of inactivity if banks are unable to track down the owner. Lost super accounts will be placed on SuperSeeker if they contain less than $2000 where the account has been inactive for five years or the member is uncontactable.
With savers under notice, money management is more important than ever, including taking advantage of high interest accounts.[Sources]