FSA proposes £500,000 savings protection for some

Former_MSE_Guy

This thread is to discuss the following news story:

FSA proposes £500,000 savings protection for some

baby_boomer

Ordinary savers are going to be screwed, indirectly through poorer rates, by the FSCS compensation scheme for the next three years, even if we don't have any more institutions that need saving. We don't need any additional burden to help the rich, thank you.

If you inherit £500K you can and should afford a financial adviser to protect you.

The FSA has got far more important things to do than this. It should be identifying and heading off financial car crashes before they happen.

In terms of crassness this is on a par with the Tories' proposal to increase IHT to £1m.

But I can see why New Labour ministers & politicians, after more than a decade at the trough, might pass such a measure for the benefit of their own families.

Hungerdunger

baby_boomer wrote: »

Ordinary savers are going to be screwed, indirectly through poorer rates, by the FSCS compensation scheme for the next three years, even if we don't have any more institutions that need saving. We don't need any additional burden to help the rich, thank you.

What about the person who sells one property for, say, £250k and has the money in a bank account for a couple of weeks until he completes on a new house. Would you seriously expect him to split that money between five separate institutions just for that short period of time?

opinions4u

Hungerdunger wrote: »

What about the person who sells one property for, say, £250k and has the money in a bank account for a couple of weeks until he completes on a new house. Would you seriously expect him to split that money between five separate institutions just for that short period of time?

I'd rather have no compensation scheme and a secure banking system.

I think that was the point made in the preceding post.

baby_boomer

It's not exactly an FSA vote of confidence in the future, is it?

And how relevant is it when the Prime Minister has already promised - at taxpayer's expense - that no UK saver will lose any money?

What this is, in practice, is a way of moving the cost of compensation for amounts above £50K from the UK taxpayer to the UK saver who ALREADY has to fork out for the FSCS through lower savings rates .

This is also Lord Turner trying to rebuild his ragged relationship with the government in advance of any rethinking about the failed "Tri-partite" system of financial regulation.

*MF*

You can't escape the conclusion that every failure on the part of the FSA to regulate adequately imposes a cost elsewhere.

In this instance they have belatedly woken up to the fact that larger sums of money may for a while exist - and which fall below the current levels of protection.

But in the circumstances they out line - where perhaps the need for temporary protection is greater than the need for immediate returns - ie., in time the sums can be more widely spread as best suits each individual - would it not be easier and more beneficial if NS&I opened a facility specifically for such circumstances.

It would offer the optimum in the protection needed - and altho' any interest might not be the best - that would be the price of the protection sought, and it would assist the Government's coffers at a time when it is badly needed.

It would also assist those such as the Building Societies who are being asked to provide very large and highly disproportionate sums to the FSCS as a result of Bank failures - which can in very great part be traced back to the failures of the FSA - failures which cannot again be ruled out for the future - not if their track record tells us anything.

dunstonh

Talk about making it more confusing.

As for future costs mentioned above, I can tell you all financial services companies, even those not involved in there areas, are going to be hit big time and that means passing the costs on. That will mean higher charges whether implicit or explicit (savings accounts are implicit and the charge is hidden as the net interest charge).

baby_boomer

*MF* wrote: »

It would also assist those such as the Building Societies who are being asked to provide very large and highly disproportionate sums to the FSCS as a result of Bank failures.

What a shame that the imprudent Dunfermline directors have undermined their case.

*MF*

Take your point - and having watched the debate on the EDM brought forward by Ann Cryer - I still cannot believe how Willie Rennie must feel after the speech he made - his praise of the Dunfermline was way OTT. A week is a long time in politics - writ large!

But does it undermine the case as you suggest? May I differ by saying I don't think it does. Using the deposit base, as opposed to say the amounts at risk, or the activity risk is disproportionate - and perhaps, lol, the Dunfermline situation proves that point, in its very own way, huh?

Milarky

*MF* wrote: »

would it not be easier and more beneficial if NS&I opened a facility specifically for such circumstances.

It would offer the optimum in the protection needed - and altho' any interest might not be the best - that would be the price of the protection sought.

That's a champion idea. At the moment (as I understand) the amounts you may put into an NS&I account are somewhat limited - and generally not 'on notice'. So the simplest thing is to

1) have a 'basic account' paying interest upto a set balance (like £50,000)
2) pay no interest on the 'unlimited' balances above £50,000 but otherwise access on identical terms

It would involve minimum changes to the existing system

baby_boomer

This would really screw the building societies and future mortgage lending!

And how they would moan! [They've alreay got a big gripe against NSI and Alan Sugar - and who can blame them?]