Savers will not lose money

Published:

08 October 2008

Topic:

News,Money,Savings

After a tumultuous day yesterday, savers can breathe a sigh of relief. The Chancellor has confirmed that the 300,000 savers who have accounts with Icesave will not lose any money as a result of the Icelandic banking meltdown and the 160,000 customers of Kaupthing Edge and 22,000 who have accounts with Heritable Bank, have been saved by ING Direct, the Dutch provider.

ING has announced that it will buy more than £3billion of deposits from the stricken Kaupthing Edge and Heritable Bank, which is owned by Icesave's parent company, Landsbanki. This should reassure the 180,000 or so savers who have money invested with these providers. Their funds will now be transferred to ING Direct.

The Dutch provider is not buying the savings book of Icesave however, but this does not mean its 300,000 customers stand to lose money as a result of Landsbanki's collapse. The first £50,000 held in any Icesave account is protected under the terms of the Financial Services Compensation Scheme (FSCS). The Chancellor, Alistair Darling, has said that anything above that amount will be refunded by the Treasury.

Although the details of how customers can claim their money back have not yet been fully outlined, savers can claim the first £50,000 held in an account through the FSCS and they may yet be able to claim the full amount in the same way. It is also possible that the Treasury will pick up any amounts above the £50,000 level, while it has even been suggested that customers may be able to transfer the money direct from the original provider.

This is great news for worried consumers. Whilst the Government has been criticised for not issuing a formal guarantee protecting 100% of savers' money as its Irish counterpart has done, it has pledged to do everything it can to ensure no saver loses any money. As Clare Francis wrote in her article, Market meltdown, what now for savers?, this pledge is effectively saying savings are totally guaranteed - even though the Chancellor won't actually use the 'g' word -  and the confirmation that no Icesave or Heritable Bank customer will lose any money supports this.

The Government has said it will evaluate things on a case by case basis but now a precedent has been set, savers can relax: it is surely inconceivable that the Government will bail out some and not others.

The exact details of how Icesave customers should reclaim their money have yet to be finalised - we are obviously in unchartered territory at the moment and the FSCS has never been tested in this way before. However, the FSCS has set up a dedicated hotline for concerned savers to call (0845 730 0131). There is also information on its website.

Related Links

• Read Clare's article 'Who owns who?'
• Compare more than 4,000 UK savings accounts