How would you advise on this dilemma?

Primrose

An elderly person I know has a Fixed Rate Bond maturing shortly and has been offered another deal by her provider, obviously less than current interest rates, but a reasonable one given the BofE interest rate drop to 2%.. She doesn't have internet access or computer literacy to check around for good rates and isn't very mobile so doesn't want the hassle of withdrawing the money and then having to look for another provider paying monthly income which she needs. Her dilemma is that she has well over the compensation limit to reinvest. Would your gut instinct be to advise her to go ahead and reinvest on the basis that the Government wouldn't let an institutuion fail, or encourage her to face up to the inconvenience of splitting it around?

Reaper

Which bank?

Primrose

I think it's with Saga, but not sure.

Reaper

Saga are part of HBOS. Not the most secure of banks but the merger with Lloyds TSB to save them seems unstoppable now.

I would be tempted to say yes both because Saga ought to now survive as a bank and because the government's past willingness to compensate savers above £50k in at least 2 cases means the chances of them paying out over £50k on a UK owned bank look excellent.

However you (and she) should accept there is an element of risk, however small.

bjorn_again

Primrose wrote: »

I think it's with Saga, but not sure.

If it is Saga, even pre-supposing the Lloyds takeover, it would be political suicide for any Party not to guarantee pensioners savings.

Broadback

bjorn_again wrote: »

If it is Saga, even pre-supposing the Lloyds takeover, it would be political suicide for any Party not to guarantee pensioners savings.

I'm, not too certain of that, they have certainly allowed their income to drop with no redress. However I do think that the Ladies money would be safe with Saga/HBOS LloydsTsb, or whatever the flavour is this month. :cool:

cos69

Primrose wrote: »

...... Her dilemma is that she has well over the compensation limit to reinvest. Would your gut instinct be to advise her to go ahead and reinvest on the basis that the Government wouldn't let an institutuion fail, or encourage her to face up to the inconvenience of splitting it around? ...

You probably get 99.99% safety by staying within the £50k limit, some might say its 100% but we are in troubled times and the government is going to start printing money to paste over the gaps in the economy. If she has more than £60k, then play safe and put the excess over £50k with another institution. If there is an election next year, a different government with a 5-year term might decide it only has an obligation to pay upto the guaranteed amount.

Primrose

I think one of her other problems is that she no longer has a car/driving licence, or a valid passport, so is worried about other institutions being difficult about money laundering identification if she tries to move some of her money elsewhere.

chesky369

Does she realise about the £50k limit? If not, you should probably mention it and see what her reaction is. Presumably since the last limit was £35k, she also went over that figure previously, so she might feel - as so many others do - that it's worth the risk.

Primrose

Yes, she's now belatedly aware of the £50K limit but wasn't aware there was any limit at all when she first invested in the account and hinted that her savings were "well above" this limit. Apparently she'd put most of her savings, apart from her emergency money, into this one place to keep her financial affairs simple and avoid having monthly income coming in from several different sources.

cos69

Regardless of the compensation limit, I would not put all my money with one institution. True, you will get it back if the institution you have it with folds, but it could take 3 months or even 6 months which is a problem if your dependent on the interest or need to spend some of it.

As long as she can produce a bank statement or pension statement and the odd utility bill - she should be able to open another account.