Martin's advice questioned

epm-84

masonic said:

epm-84 said:

masonic said:

epm-84 said:

The time there was a problem with the highest interest rate bank was when it was an Icelandic bank offering something like 6% just before the financial crash.  On that occasion Martin personally reassured people that putting money in an Icelandic bank was perfectly safe.

Are you suggesting that offering "something like 6%" just before the financial crash was some sort of indication that it was too good to be true? 

No I'm said offering something like 6% because that meant it was one of the best savings rates for online accounts and was why MSE included it as a best buy.  I had a Barclays ISA which I think had an interest rate of 5 point something percent but ISA with rates that good usually didn't allow previous year's subscriptions to be transferred in.

I do recall Martin making TV and radio appearances where he said don't worry that it's a bank in Iceland, your money is perfectly safe.  Unfortunately, some local authorities decided it was perfectly safe for them to put their rainy day fund in to a high interest account in Iceland and their rainy day funds disappeared, never to be seen again - Cheshire County Council was one such example.

Here is what his website had to say on the issue, at the time it listed an Icesave savings account as the best buy in late 2007:

So he did consider it "ridiculously unlikely" that a bank would go bust, and considered it "a touch of overkill" to spread your money around to stay within the FSCS limit, but those weren't really unreasonable views at the time. Earlier in the same year, the compensation limit was 100% of the first £2,000 and 90% of the next £33,000 and there was nobody advocating saving no more than £2,000 per bank.

epm-84 said:

Yes I seem to recall the underlying message is there's a financial services compensation scheme so the money is just as safe in Iceland as in the UK.  However, what then happened after the collapse is a legal dispute about whether the Icelandic compensation scheme covered UK deposits.

He turned out not to be wrong, despite the international legal dispute. The legal dispute had no impact on consumers, it was a battle between the UK and Icelandic Governments that concluded a long time after savers were compensated. The Icelandic Government essentially decided to renege on their obligation to compensate savers, but at that time the FSCS still had an obligation to top up compensation coming from foreign compensation schemes to the UK level. As mentioned above, the UK Government decided to go beyond the obligations of the FSCS and compensate 100% of the losses of all qualifying savers without observing the normal FSCS limit.

Since the banking crisis, foreign compensation schemes act independently of the FSCS, and I would never save with a financial institution that did not have a UK banking licence and FSCS cover.

epm-84 said:

I seem to remember the end result was access to online accounts was reinstated for a limited period and people were told to withdraw all their money within x days or they would lose it forever.

You seem to remember wrong. I was one such saver who claimed through the online portal. Here is an excerpt from the email I received from the FSCS in November 2008:

"If you do not seek payment within one month from the date of this email, you will be contacted separately by the FSCS with details of how to make a claim for your deposits with Icesave. This will be through a paper-based application process once the electronic process is complete. This process will be slower (we aim to complete this process so far as possible within 6 weeks of receipt of a completed application form), but you will receive the same amount no matter which process you use (unless you hold a fixed term deposit and opt to await payment until the end of the term, as explained above)."

As alluded to at the end, some people elected to hold their fixed term deposits until the end of the term and receive their full capital and interest from the FSCS at the original maturity date of their account (that involved claiming through the paper system).

Nobody was told "to withdraw all their money within x days or they would lose it forever".

Of course Icesave was not the only institution that went bust. Kaupthing Edge and Heritable Bank customers simply had their accounts moved to ING Direct. That process was seamless and they were not required to take any action to avoid losing their money.

As alluded to above, it wasn't just Icelandic banks that went bust. UK based Bradford & Bingley customers had their accounts moved to Abbey in a very similar manner to the Icelandic banks' accounts moved to ING.

Whatever quote you found from Martin didn't appear in your post.

I didn't hold one of the Icelandic accounts so I'm basing what I've said on what was reported, opposed to what emails were sent out to customers.  It might be I remembered Martin shouting to customers to get their money out NOW once access had been restored as they only had a limited time to do it, as meaning they would have issues getting it back if they didn't withdraw it.  Of course, why would you not take the money out at the first opportunity?

So are you saying the dispute didn't cause any delays in customers being unable to access their money?  If I held an instant access account I wouldn't say I was unaffected if I was unable to access the money I had in the account, even if it was just for a few days or weeks.

The £2000 limit for 100% compensation, combined with media reports were probably the reasons Northern Rock had to be taken over by the state.  Most customers with savings wanted their money back when they heard there was a risk Northern Rock could collapse, so the problem became a much bigger one.

masonic

epm-84 said:

masonic said:

epm-84 said:

masonic said:

epm-84 said:

The time there was a problem with the highest interest rate bank was when it was an Icelandic bank offering something like 6% just before the financial crash.  On that occasion Martin personally reassured people that putting money in an Icelandic bank was perfectly safe.

Are you suggesting that offering "something like 6%" just before the financial crash was some sort of indication that it was too good to be true? 

No I'm said offering something like 6% because that meant it was one of the best savings rates for online accounts and was why MSE included it as a best buy.  I had a Barclays ISA which I think had an interest rate of 5 point something percent but ISA with rates that good usually didn't allow previous year's subscriptions to be transferred in.

I do recall Martin making TV and radio appearances where he said don't worry that it's a bank in Iceland, your money is perfectly safe.  Unfortunately, some local authorities decided it was perfectly safe for them to put their rainy day fund in to a high interest account in Iceland and their rainy day funds disappeared, never to be seen again - Cheshire County Council was one such example.

Here is what his website had to say on the issue, at the time it listed an Icesave savings account as the best buy in late 2007:

So he did consider it "ridiculously unlikely" that a bank would go bust, and considered it "a touch of overkill" to spread your money around to stay within the FSCS limit, but those weren't really unreasonable views at the time. Earlier in the same year, the compensation limit was 100% of the first £2,000 and 90% of the next £33,000 and there was nobody advocating saving no more than £2,000 per bank.

epm-84 said:

Yes I seem to recall the underlying message is there's a financial services compensation scheme so the money is just as safe in Iceland as in the UK.  However, what then happened after the collapse is a legal dispute about whether the Icelandic compensation scheme covered UK deposits.

He turned out not to be wrong, despite the international legal dispute. The legal dispute had no impact on consumers, it was a battle between the UK and Icelandic Governments that concluded a long time after savers were compensated. The Icelandic Government essentially decided to renege on their obligation to compensate savers, but at that time the FSCS still had an obligation to top up compensation coming from foreign compensation schemes to the UK level. As mentioned above, the UK Government decided to go beyond the obligations of the FSCS and compensate 100% of the losses of all qualifying savers without observing the normal FSCS limit.

Since the banking crisis, foreign compensation schemes act independently of the FSCS, and I would never save with a financial institution that did not have a UK banking licence and FSCS cover.

epm-84 said:

I seem to remember the end result was access to online accounts was reinstated for a limited period and people were told to withdraw all their money within x days or they would lose it forever.

You seem to remember wrong. I was one such saver who claimed through the online portal. Here is an excerpt from the email I received from the FSCS in November 2008:

"If you do not seek payment within one month from the date of this email, you will be contacted separately by the FSCS with details of how to make a claim for your deposits with Icesave. This will be through a paper-based application process once the electronic process is complete. This process will be slower (we aim to complete this process so far as possible within 6 weeks of receipt of a completed application form), but you will receive the same amount no matter which process you use (unless you hold a fixed term deposit and opt to await payment until the end of the term, as explained above)."

As alluded to at the end, some people elected to hold their fixed term deposits until the end of the term and receive their full capital and interest from the FSCS at the original maturity date of their account (that involved claiming through the paper system).

Nobody was told "to withdraw all their money within x days or they would lose it forever".

Of course Icesave was not the only institution that went bust. Kaupthing Edge and Heritable Bank customers simply had their accounts moved to ING Direct. That process was seamless and they were not required to take any action to avoid losing their money.

As alluded to above, it wasn't just Icelandic banks that went bust. UK based Bradford & Bingley customers had their accounts moved to Abbey in a very similar manner to the Icelandic banks' accounts moved to ING.

Whatever quote you found from Martin didn't appear in your post.

Perhaps you aren't able to see images in posts, here is the text:

"Banks are like bridges, they almost never collapse but when they do the splash is huge. All legit UK savings institutions are registered with the Financial Services Authority (FSA), which means they're signed up to the Financial Ombudsman complaints service and more importantly the Financial Services Compensation Scheme.
This means if the ridiculously unlikely even a bank went bust, you'd get every penny of the first £35,000 of your savings per institution back. Therefore, while I think it’s a touch of overkill, if you want total peace of mind don’t put more than £35,000 in any bank; spread it around for safety. Full details of the rules, how to do this, and pros and cons are in the Are my savings safe? article."

epm-84 said:

I didn't hold one of the Icelandic accounts so I'm basing what I've said on what was reported, opposed to what emails were sent out to customers.  It might be I remembered Martin shouting to customers to get their money out NOW once access had been restored as they only had a limited time to do it, as meaning they would have issues getting it back if they didn't withdraw it.  Of course, why would you not take the money out at the first opportunity?

I didn't see anything reported that is consistent with what you have said, but the media does have the habit of whipping itself up into a frenzy and reporting all sorts of factually incorrect information while pushing their agenda. Nothing has changed in that respect.

MSE got hold of a copy of the emails sent to customers and published a copy on the site, along with a summary of the process and a FAQ.

There was certainly a justification for telling Icesave savers to claim through the online portal within 1 month, rather than wait for the paper claim system, since the online system involved confirming a few personal details and ticking a couple of boxes, while the paper system involved filling out a form. Though I've reviewed the narrative in the weekly tip email archives and I can detect no trace of what you describe you "might" remember in those.

There was also IMHO a justification for savers to move their money out of ING Direct, as it was not protected by the FSCS, but rather the Dutch compensation scheme. Martin quite rightly pointed this out in his safe savings article, but did not go as far as to make a recommendation that customers should consider moving their money.

I obviously didn't track down and watch all of Martin's television and radio appearances during the time, but I certainly saw some of them, and my recollection is quite different to yours and more consistent with the written records I mention above.

epm-84 said:

So are you saying the dispute didn't cause any delays in customers being unable to access their money?  If I held an instant access account I wouldn't say I was unaffected if I was unable to access the money I had in the account, even if it was just for a few days or weeks.

No I'm not saying that at all. I'm saying the delays related specifically to Icelandic banks failing were in line with normal FSCS timescales and consistent with examples of UK institutions failing around the same time. It was a lot faster than the more recent failure of DotComUnity Credit union, in which many MSErs opened a market leading cash ISA several years ago.

Back in those days, you were guaranteed not to be able to access the money for 3 working days as faster payments did not exist.

The transfer to ING Direct, as I mentioned in a previous post was fairly seamless. The accelerated online payment system used for Icesave was (I believe) the first time FSCS compensation had been paid in that manner, and faster than the existing paper claim system.

You should always plan for the possibility you won't be able to access money in any particular account for a few days or weeks. It can happen to anyone for a number of reasons.

epm-84 said:

The £2000 limit for 100% compensation, combined with media reports were probably the reasons Northern Rock had to be taken over by the state.  Most customers with savings wanted their money back when they heard there was a risk Northern Rock could collapse, so the problem became a much bigger one.

Funnily enough, the FSCS made a similar point on the 10 year anniversary of that event: https://www.fscs.org.uk/news/protection/protection-doubled-since-crash/

It's probably why there was a very rapid removal of the 90% limit for the next £33k of compensation thereafter.