Problems via the backdoor

ca1ghe

Has anybody been affected by this problem or can anybody offer advice. Each and every person has protection to the sum of £85000 per financial institution by the government. However - if you lock a sum of money for a time of 3 or 5 years for instance in a bond or ISA but then another financial institution buys the first institution and you have money locked in the buying institution and you go over the £85000 limit - how do you stand? Any advice would be welcome.

closed

generally, they extend the protection to include the bond until it matures, (if a takeover/merger happens)

alanq

closed wrote: »

generally, they extend the protection to include the bond until it matures, (if a takeover/merger happens)

I believe that the government (not FSCS) guaranteed deposits with Northern Rock and continued to do so for term deposits until maturity after selling it off. I am unaware that the FSCS does what you describe.

In the cases of merging building societies that I have read about the merging institutions have offered members with more than £85,000 deposited with both of them in total the opportunity to withdraw excess funds from fixed term bonds early without penalty. If the FSCS was going to protect the accounts then they would not have needed to make this offer. I don't know if there is any requirement for merging institutions to provide this means of escape.

An example - the Yorkshire BS / Norwich & Peterborough BS merger

Savers with both societies (including the Yorkshire's brands such as Chelsea and Barnsley building societies) when the merger completes will be limited to one Financial Services Compensation Scheme maximum of £85,000 per individual, or £170,000 for joint accounts.

The Yorkshire said: "Consideration will be given to allow savers who, as a result of the proposed merger, exceed this amount to reduce their combined balance without notice or any loss of interest on the amount withdrawn."

http://www.theguardian.com/money/2011/apr/22/nandp-yorkshire-building-society-merger