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Clare Francis: Yesterday was the day that all savers have been dreading really. The collapse of Icesave and Heritable Bank meant that for the first time UK savers were told that they'd have to reclaim their money through the Financial Service Compensation Scheme.
This protects them for the first £50,000 held in any account and for most savers this is adequate protection. But for those with more than that in their account it was a worrying time, plus the fact the UK Bank shares plummeted and fears were rife to whether any other institutions would fall into further problems.
Well Stuart Glendinning's with me today who is the managing director here at moneysupermarket.com, just to talk about what's happened since, because this morning we've had confirmation from the Government that any saver with Icesave or Heritable who has more than £50,000 in their account will have that money refunded by the Treasury, so no saver will lose any money at all through this crisis.
Q1: Stuart, do you think this is enough to reassure savers, and sort of stem the panic?
Stuart Glendinning: Well it's certainly a very important step and we know that an awful lot of people have invested with Icesave - in fact over 300,000 people have opened savings accounts with Icesave - and according to the BBC last night they believe at least 15,000 had balances in excess of £50,000.
And we've also seen a lot of postings on our forum from worried individuals, so yes it will obviously be a big reassurance to know that their money is protected, although I imagine people are still going to be a little bit frustrated in terms of how long it takes them to actually get their money, and how they're going get their money. So I don't think we're out of the woods just yet.
Q2: And of course we don't actually know how long it is going to take do we, because we are in totally uncharted territory here - we've never had to claim through the compensation scheme like this before, have we?
Stuart Glendinning: That's right, I mean, absolutely uncharted waters. I've been in the industry 25 years and not seen anything like this - the uncertainty that exists in the whole sector. I think we've all felt for some time that we're on the verge of something bad, but not really quite knowing what, but there's no doubt about it.
You know people are very nervous about their savings balances and it looks like what Icesave and Heritable have shown is that actually they were right to be worried, and I suppose the key thing now is now, more than ever, is get your money spread across different organisations - it absolutely does not make sense to have a lot of money with one bank, even if it's a really big bank.
I would really encourage people to get out, and get out quickly and get their money spread out across different organisations because although the Government have guaranteed now the balances for the Icesave savers, we can't be certain that that will be extended out to other banks and it's best to take advantage. Don't forget, if you're a joint account effectively you can get £100,000 worth of cover and I'd suggest that you really do focus on spreading your savings presently.
Q3: Because one of the problems yesterday was that Icesave customers and Heritable Bank customers couldn't actually get at their money - you know, their accounts were frozen and no withdrawals were permitted and they were just stuck in limbo for the whole day, not knowing what on earth was going on with either organisation and what the future held for their money.
We've since had some clarification and obviously they will be able to get it back, but as you say we don't know how long that's going to take, so your advice is if you've got more than £50,000 in any account, move the surplus now while you can?
Stuart Glendinning: Yes, absolutely - don't have a lot of money in one organisation, do get it spread, definitely get it spread.
Q4: Speaking of the forums, one of the things that has been cropping up by some people is the fact, you know, is moneysupermarket.com and other comparison sites partly to blame for the fact so many people have been stuck with money in Icesave because we've listed them on our site - what's your response to that?
Stuart Glendinning: People being angry that they can't get their money is entirely understandable. I think some of our competitors historically have been criticised, and I would say quite rightly, because they have not shown the whole market - moneysupermarket.com compares the whole market, and I genuinely believe that that is the best way to go, but I understand the frustration of people.
Historically when new savings entrants have entered the market we do liaise with the Financial Services Authority to identify if savers will be protected under the Financial Services Compensation Scheme - and Icesave where covered by that as are many other banks and building societies trading in the UK - but I understand the disappointment, I understand the frustration, but I think moneysupermarket.com will remain committed to comparing the whole market
Q5: The thing with Icesave is that no-body foresaw, no-body expected the financial crisis to deepen, events to happen as they have unfolded as they have over the last few days, and if you leave deals out of the tables you would be criticised - you know, 9 times out of 10 everything is perfectly fine and we're potentially not giving access to a market leading rate.
Stuart Glendinning: As I said, some price comparison websites have been criticised for not listing providers because maybe they weren't trading with that price comparison site and the price comparison wasn't making any money from them. We list all providers whether or not they trade with moneysupermarket.com, which is undoubtedly a richer user experience. But I absolutely understand the frustration people must feel if their savings, and you know sometimes people have worked for years to amass their savings or they have inherited it and their family have worked years to inherit those savings, and the fear that you could just lose it... it's a genuine fear and people would rightly be upset about it.
The reassuring thing is the government have today confirmed that if you have got money with Icesave or Heritable bank and its more then £50,000, you will get it all back so that is great news, a lot of people will be relieved by that and I am sure the mechanics of it - I mean, we will try and keep people posted on the website as well, as soon as we know how you can claim it back and the time its likely to take - we will make sure that we get that posted on the website. It just reaffirms, if you are intending to spread your money and are thinking 'I will get round to it', I really would implore people to get on and do it.
Q6: what we have seen over the last week or so is a lot of money going into Irish accounts following the Irish Governments announcement last week that it will guarantee 100% of deposits until 2010. Our Government's been criticised in some respects for not issuing the same promise. Obviously what they have shown this morning is that they're not going to let savers in Icesave lose any money - they have set a precedent now - do you think that this is going to be enough to stem that flow of money to Ireland, and to reassure people that it is safe here in the UK?
Stuart Glendinning: Spreading your money across different organisations is more important then listening to a 100% guarantee. Spread rather then invest it all, because I suppose I think the reason why the UK government hasn't given a 100% guarantee to all UK savers is if you are going to make that guarantee, you have got to be prepared to deliver on it, and maybe quite legitimately the UK government is thinking 'well, if all UK savers lost their money, could we, do we have the ability to meet which would be an absolutely staggering sum... '
Clare Francis: - it's £1.9trillion -
Stuart Glendinning: OK £1.9trillion! I think it's probably wise that our Government are hesitating to make that recommendation, even if though it's going to be really popular from a consumerist point of view to demand the government back everyone's savings, maybe they are genuinely worried about their ability to do it.
If you then think 'well, hang about, if you follow that logic its right to then wonder does the Irish government have the capability to guarantee all its savings balances, and that's not just its savings balances for individuals in Ireland - a lot of people in the UK have started to put their money across.
So for me that best thing: spread your investments. So if you are going to put your money into an Irish bank I would say 'yes, that's probably fine, but I would confine it to £50,000, or if it's a joint account, £100,000.
CF: Thank you Stuart.
Stuart Glendinning: Thanks Clare.
