Are your savings safe? article discussion

Oblivion

baby_boomer wrote: »

Re earlier discussion, it's not a comfort that the American version of the savers compensation scheme is funded - whereas ours is not .

Following the Northern Rock run, I recall there being much talk about the government ordering a review of the savers compensation scheme. There was even talk, I think from Chancellor, of raising the compensation limit to £100,000. Then I was aware of news that the British Bankers Association were pouring cold water on this idea ... where would the money come from etc.

Anyone know whether this review is still ongoing or has it been sunk without trace?

ianmr65

Oblivion wrote: »

Following the Northern Rock run, I recall there being much talk about the government ordering a review of the savers compensation scheme. There was even talk, I think from Chancellor, of raising the compensation limit to £100,000. Then I was aware of news that the British Bankers Association were pouring cold water on this idea ... where would the money come from etc.

Anyone know whether this review is still ongoing or has it been sunk without trace?

The FSCS - who manage the compensations system still have something on there website about the level of compensation being under review.

The FSCS scheme pays out by levying members (in this case the banks) for the cash. Untill the levy hits the £4 billion mark, after that the Goverment steps in.

So I think that would be the reason the BBA would be against it.

The US compensation levels are up to $500,000.

arty4

jamesd wrote: »

arty4, The March review of FSCS funding by the FSA made proposals that would significantly increase the annual cap to about 4.4 billion Pounds a year....

now i've read the relevant parts of the document - do we know if the proposals were adopted?

TractorGirl327

baby_boomer wrote: »

Top question! I'm sure you're not the only one potentially affected.

This is unknown territory but I personally think you are probably over the threshold .

By way of example (in the absence of a directly comparable example involving the FSCS because we don't have one, fortunately ), if these same accounts were at a smaller building society which merged with a larger one, then your windfall amount would usually be worked out as a % of the combined balance of your personal account plus your children's accounts where you are trustee - i.e. ALL the money would usually be counted as yours on the basis that you were the member of the society on each of the three accounts (assuming that you were first named in each case - e.g. Ms. Jan TractorGirl Ttee for Miss Tessa TractorGirl).

Re earlier discussion, it's not a comfort that the American version of the savers compensation scheme is funded - whereas ours is not .

Thank you baby_boomer. I'm going to open another savings account with a different bank and transfer a couple of thousand to it so I always have less than £35,000 with the Halifax.

daz9643

cb101 wrote: »

Hi

I have been reading various posts on here regarding how safe the offset savings are in an offset mortgage plan.
I queried this with IF since my 60k mortgage is fully offset by my savings- so if the worst scenario happened- a) would my savings be used to pay off my mortgage or b) would I be guaranteed only 31.7k of my savings and still owe the approx 29k of mortgage?

I received the following reply and I don't think I'm any the wiser or maybe it means b) as above?


"Thank you for your Email.

Halifax / Bank of Scotland / Birmingham Midshires / Intelligent Finance being part of HBOS and one of the world's strongest banks. We have assets of over £660bn and one of the strongest credit ratings of any bank.

Under the Deposit Sub-Scheme of Intelligent Finance, compensation payments are limited to 100% of the first £2,000 and 90% of the next £33,000 of customer's total protected deposits, making a maximum payment to that depositor of £31,700.

The total liability is worked out on all the accounts in the name of a depositor held with the financial institution concerned, including the depositors share in a joint account. The trustees of a trust account would normally be regarded as a separate depositor.

This means that if a customer has made deposits in a savings or bank account with Halifax Plc (including the divisions of Halifax Plc, for example Intelligent Finance), there could be a maximum payment to that depositor of £31,700 under the Deposit Sub-Scheme.

If the unthinkable was to take place our mortgage business would be sold/bought by another company who would also be responsible for recovering repayments."

Can anyone confirm this means b)?
In which case having more than 31.7k or 35k offset savings isn't such a good idea?

Thanks

C

Sounds like you've just confirmed what i was worried about and that savings in offset mortgage accounts that total over £35,000 are not protected and would also not be used to clear the debt. Martin needs to get on this quick as his article , i believe, is wrong.

daz9643

Having read the article again i've realised they refer to the deposit sub-scheme which may be different to the government compensation scheme so Martin may be correct. If these are 2 different schemes i would be interested to know why your response didn't refer to the government compensation scheme.

daz9643

I have just e-mailed moneysavingexpert.com as i also have conflicting advice over the FSCS rules for compensation regarding savings in offset mortgage savings accounts. I have been on the phone to Brittannia building society this morning and they tell me that only 100% of the first £35,000 in the savings account is covered and the savings will NOT be used to clear the mortgage balance, contrary to the information Martin posted on the website.

AlanStone

I have a small personal pension fund in HBOS as well as various savings accounts. Is the pension fund covered by the same scheme and therefore included in the £35K protection or is it treated separately? If the latter what protection is there for it (and I well aware "values can go down as well as up"). Thanks.

jamesd

cb101, since that gives the old FSCS rules I'm not impressed or trusting of it. However it did answer your question indirectly: Intelligent Finance is part of the banking group with the limit applying over the whole group. HBOS is a bank and as a bank it has a right of offset so the credits would be used to offset the debts.

If you want greater clarity ask:

1. Thank you for your description "100% of the first £2,000 and 90% of the next £33,000" of the old FSCS limits. Please confirm that the new FSCS limit of 100% of the first 35,000 of deposits that was introduced on 1 October 2007 is the one that really applies.
2. The Financial Services Authority says that the position after subtracting debts (mortgage) from savings (offset savings account) is what will be used if the financial institution has the "right of offset" during the bank's insolvency proceedings. The FSA further notes that for UK banks (as distinct from building societies) this is the case. Please confirm that my mortgage and savings accounts are held with a bank and that Intelligent Finance has the right of offset to use the balance of the offset savings account to reduce the outstanding mortgage debt. Alternatively, if IF is not a bank for this purpose, please tell me if the mortgage and/or savings contract grants it the right of offset, as can be done by building societies.
3. Please don't speculate or use old FAQs but instead get confirmation from those within the company who know the strict and accurate legal answers.

daz9643, that's the default position for a building society so it is likely to be correct. It would only be different if their mortgage contract granted them a right of offset.

jamesd

AlanStone, the long term insurance (pension and life assurance) protection is 100% of the first 2,000 plus 90% of the remainder, with no upper limit.

You should check but it is likely that this only applies to insurance-based conventional pensions. Pure SIPP-type and other non-pension fund investments may well be covered by the investment limit that is 100% of the first 30,000 plus 90% of the next 20,000 per institution. Each fund management company is a different institution so the normal diversification of an investment portfolio would lead to a far higher limit than just 48,000.

In both cases the trustee arrangement with pensions means that the investments are not directly owned by the management company but are instead likely to be held in trust in the name of the investors. This means that bankruptcy of the pension management company would not expose them to loss because they aren't part of its assets.

So: if you rmoney is in insured pension funds it's at least 90% safe.