Savings compensation - what happens to annual interest?

ChuckCash

Hi all,

Appologies if this question has been asked before. I've searched the forums briefly, but can't see this discussed...

The financial compensation scheme covers savings up to £50,000. I'm wondering in the event that an institution goes bust, would the final savings balance include any outstanding interest?

For example, if the account pays interest annually and the bank fails 1 month short of the anniversary date - would any interest be added or would 11 months worth of interest be lost?

Also if it is the case that interest would be added, would £50,000 be a safe amount to keep in the account, as the resulting compensation claim would then exceed £50,000? Maybe £47,500 would be a safer maximum amount for accounts which pay interest annually?

Any thoughts / comments on this would be greatly appreciated thx.

baby_boomer

If other banks are going to be asked to pay for compensation for savers at irresponsible banks, what do you think they will say to paying irresponsibly high & unsustainable savings rates?

Why should a responsible bank, at the expense of even lower savings rates for its customers, fund the chancers in the savings market [by that I mean the banks rather than those that follow the MSE savings rate Holy Grail].

With capital at a premium, and lack of capital the source of bank failures, this is a step too far.

My best guess is that people will get accrued interest to the day of the bank failing - but not beyond.

We'll have to wait and see. I'm sure it will get asked in the House of Commons in due course.

Lokolo

Try searching harder.

Any interest upto the date which hasn't been paid will also be included. However, this is still upto £50k. So if you have £50k in the bank you won't get anymore than this.

Birdie100

Although baby boomer, how high are "high and irresponsible" savings rates defined exactly. Is bradford and Bingley, currently offering 6.7% for a one year fixed term account, really "high and irresponsible"?

silvercar

Its a bit like house prices, people kept believing that they would go up and up and then they got stuck.

People get believing that they could get a higher and higher interest rate and sent their money far and wide chasing that elusive extra .01%.

baby_boomer

Birdie100 wrote: »

Although baby boomer, how high are "high and irresponsible" savings rates defined exactly. Is bradford and Bingley, currently offering 6.7% for a one year fixed term account, really "high and irresponsible"?

Wait till we've nationalised a few more banks - then we'll see an entirely different set of interest rates .

Santander (B&B) is at least in the EU.

As I've posted elsewhere, how good would the EU be at organising a bail out of an international bank operating within the EU?

Link to MSE thread on the House Price forum - Do you really fancy the EU to organise a bank bail out?

david78

I have never seen a definitive answer to the question of what happens to accrued but unpaid interest. On the BBC news today it said this was one of the things the FSA were going to have clarified.

I would expect to get no interest though.