changes to compensation limits when building societies merge

sallyd23

How come building societies that merge can just decide to give people only half the compensation that was available when they took out the original product? We're not allowed to change the Terms and Conditions when it suits us - but they are. That's what the Yorkshire and Chelsea building societies are choosing to do, and if you took out Fixed Rate savings, you can't get out of it. One rule for them and a different one for us!

Thrugelmir

Compensation for what?

The Building Societies don't make the rules! The rules are their to protect investors.

dunstonh

sallyd23 wrote: »

How come building societies that merge can just decide to give people only half the compensation that was available when they took out the original product? We're not allowed to change the Terms and Conditions when it suits us - but they are. That's what the Yorkshire and Chelsea building societies are choosing to do, and if you took out Fixed Rate savings, you can't get out of it. One rule for them and a different one for us!

Why worry about it? The Govt has effectively guaranteed any retail deposits in UK banks regardless of the 50k. Did you see anyone lose money with Northern Rock or B&B?

alanq

Until the end of 2010 there is extra protection

http://www.moneymadeclear.fsa.gov.uk/news/product/bs_merger_compensation.html

Aegis

sallyd23 wrote: »

How come building societies that merge can just decide to give people only half the compensation that was available when they took out the original product? We're not allowed to change the Terms and Conditions when it suits us - but they are. That's what the Yorkshire and Chelsea building societies are choosing to do, and if you took out Fixed Rate savings, you can't get out of it. One rule for them and a different one for us!

The building societies don't decide anything like this. If two societies merge and form a single entity with a unique banking licence, then the Financial Services Compensation Scheme only recognises them as a single entity. In order to maintain the existing limits indefinitely the two societies would have to remain apart, which is often completely infeasible by the time they need to merge.

This guarantee isn't provided by the building society, but instead by the taxpayer via the FSCS.

dunstonh

This guarantee isn't provided by the building society, but instead by the taxpayer via the FSCS.

The taxpayer underwrites the scheme ultimately but its funded by the regulated financial services companies. So, when B&B went down and the FSCS paid out, the Govt loaned money to the FSCS but it has to be repaid by the financial services companies in future levies.

Those levies are a business cost which is in turn reflected in the terms charged by financial services firms in looking at their costs and margin. So, in the case of IFAs, client fees will go towards it. In the case of banks, they may use 0.x% on an interest rate to help cover it. So, the real bottom line is with the consumer.

bashali

I will guess member will vote on the merger, so it will be upto members to accept or reject. so in a funny way account holder decide to half their comensation.

opinions4u

bashali wrote: »

I will guess member will vote on the merger, so it will be upto members to accept or reject. so in a funny way account holder decide to half their comensation.

Not in the case of the Cheshire, Derbyshire or Dunfermline though.