Why were Post Office accounts not already covered by the FSCS?
Bank of Ireland operates the Post Office’s savings accounts and had been doing so under an Irish licence. This meant that deposits were not covered under the UK’s FSCS.
However, Bank of Ireland has now created a UK subsidiary which will be authorised and regulated by the UK’s Financial Services Authority (FSA). From 1 November, Post Office savings will be held in this new UK subsidiary and receive FSCS protection.
Will my savings account change?
No. There will be no change to your rates, terms and conditions or financial products. The only change will be the government responsible for guaranteeing your savings.
Didn’t I have a higher guarantee under the Irish scheme?
Yes. Under the Irish Deposit Guarantee Scheme, savings up to the value of €100,000 (or currently just shy of £89,000) were protected, with top-up protection for higher deposits that continues until the end of this year.
That compares to the FSCS, which guarantees the first £50,000 in savings held under any one banking licence, or up to £100,000 for joint accounts.
If you do hold more than £50,000 in a Post Office Instant Saver, Reward Saver, Easy Saver or Variable Rate Cash ISA, you will still receive an additional guarantee under the Irish government scheme until the end of the year, so you won’t lose that additional protection.
The same goes for fixed-rate bonds held with the Post Office. If you locked money away into one of these accounts between 11 January 2010 and the end of the year, then any amount above £50,000 will continue to be protected by the Irish top-up scheme until your deposit matures.
So, even if you take out an account like the Post Office’s three-year Growth Bond, which pays 3.75%, your money will remain protected above and beyond the FSCS limit under the Irish government’s top-up protection.
Who can I contact with questions about this change?
The Bank of Ireland has set up a transfer information line on 0845 146 1513.
Isn’t the FSCS limit rising?
Yes – which is good news if you’re worried you’ll be less protected under the FSCS. From 1 January 2011, the scheme will raise its protection limit from £50,000 to the equivalent of €100,000.
With the additional top-up guarantee from the Irish government, that means there’s effectively no dip in protection for Post Office savers.
I have more than that saved, how can I protect it?
By placing no more than the €100,000 equivalent limit with any one bank, you can protect your entire savings pot. However, you do need to be careful as some banking groups own more than one banking brand.
For example, if you had £50,000 stashed with the Bank of Scotland and £50,000 with Halifax, only the first £89,000 of that would be guaranteed as they are both owned by Lloyds Banking Group.
This is why you need to make sure you deposit no more than £50,000 or £89,000 next year with any one banking licence. Our article ‘Who owns who?’ will help you check.
Where is the best home for my savings?
Of course, one of the main things to look for in a savings account is the rate that it pays. Most savers don’t exceed the FSCS guarantee threshold, and those that do can mitigate the risk by spreading their money around under several different banking licenses.
But where are the best rates just now? Well, if you want an easy access account, the market-leader is the new Nationwide My Save Plus account, paying 2.99%. However, although it is an easy access account, you're only allowed one penalty-free withdrawal a year. Any more and you lose interest. You also need a minimum deposit of £1,000.
Next best is the Post Office with its easy access Online Saver account, currently paying 2.90%.
You’ll want to consider moving your money after 12 months, though, as this rate is boosted by a temporary 1.25% bonus.
After that, the Santander eSaver Issue 2 pays a decent rate of at 2.75%. Again, both those accounts are boosted by a bonus, so be ready to move after 12 months.
If you want to make savings and haven’t yet used your annual cash ISA allowance of £5,100, then you should consider one of these tax-free accounts.
For example, the Halifax ISA Direct Reward account is easy access and pays a market-leading 2.80%, although existing current account customers get a bonus that knocks this up to 3.00%.
If you are willing to lock your money away into a fixed rate bond then you can earn even more on your savings.
The only thing to be aware of is that you can’t usually touch your money while its in one of these accounts – at best you’ll be charged 180-days’ of interest as a penalty. That means that, if the rate became uncompetitive during the term, you would be stuck with it.
Having said that, the rates available are much higher than you’ll find in the easy access accounts. Like the market-leading 4.55% offered on the AA’s 5 Year Fixed Rate Savings account. The minimum investment is just £1, so this account is available to anyone.
But again, you could always use an ISA so that your returns can’t be touched by the taxman. For example, Birmingham Midshires’ 5 Year Fixed Rate ISA pays 4.25%, which is the best ISA rate going.
However, you can get that rate without locking in for five whole years, with the Halifax Fixed Rate ISA Saver or Bank of Scotland Fixed Rate ISA Saver, which pay 4.25% for a four-year fixed term.
Both those accounts have a minimum deposit of £500 and they accept transfers from existing ISAs, so if you do have tax-free savings already you can move them over to this higher rate.
Where can I get a 100% guarantee for my savings?
If you do have more than the FSCS limited saved then there’s only one option left if you want to fully guarantee your money while keeping it all in the same place, and that’s the government-run National Savings & Investments (NS&I).
It offers a variety of savings accounts, including Premium Bonds, ISAs and Children’s Bonus Bonds.
Some people will also hold Index-linked Savings Certificates and Fixed Interest Savings Certificates but these are not on sale at the moment.