Are your savings safe? article discussion

Jane.tweedynn

Jane.tweedynn wrote: »

No one has defined Set-Off in terms of debts to savings.

I have a mortgage with my partner of £100,000, mortgage in joint names.

I have savings of £160,000 in own name.

My partner has savings of £35,000 and credit card debt of £50,000 in own name.

If the savings accounts are in separate names, whereas the mortgage is in joint names, can these be set-off? and determine order and percentage of set-off.

I take it that Martin or anyone else at MSE or anyone who contributes to these newsgroups does not know the set-off question.

How can you keep saying that savings are set off against debts if you do not know the order in which savings are set off.

I will simplify my question. If I have a £100k mortgage in joint names with my partner and I have £100k in savings and my partner has no savings. Is all of my savings set off against the mortgage?

What would happen if my partner had £10k of savings? Is the set off averaged out or do I set off £90k and partner £10k.

I think set off is in need of proper clarification.

Former_MSE_Dan

Following Martins ITV investigation on Friday night, the article has been altered slightly, mainly the part covering the FSCS's capacity of £4 billion. Here is the new section:

Is the FSCS big enough to cope?
A.The FSCS doesn’t keep a pot of cash sitting ready and waiting. Instead, it has the power to operate a 'compulsory levy' on banks, insurers and others signed up to the scheme, as and when it needs the money. The advantage of this is it can pull cash from more than just the affected sector (i.e. if an insurer went down, while other insurers must contribute first, above a set level banks would be asked too) so funds should be available.

In theory, this means should the worst happen and a bank goes out of business, the FSCS has the legal power to call in funds from major financial institutions to cover the compensation needed to repay the first £35,000 lost by every saver

However, here it gets a little complicated. The FSCS has a cap on how much cash it can levy per year from financial institutions; from 1 April 2008 the overall capacity was set at just over £4 billion. Yet in the FSA’s review document (page 77), it admits that £4 billion wouldn’t even cover the twenty-fifth biggest UK deposit taker!

That means there’s not enough money in it for all the main high street names. This is a tad worrying to say the least, although of course the Government’s main focus is to avoid every getting into a situation where the FSCS would need to pay out.

Yet it was something I wanted to deal with, so in May 08, as part of my ‘How Safe are your Savings’ programme I managed to get an interview with the Cabinet Minister responsible, Chief Treasury Secretary Yvette Cooper, MP. During the interview, as I pushed, I was told the government would ensure the £35,000 was paid out, yet I couldn’t get an answer on how… then just before the programme went out we got this statement

The Treasury gave us the following statement

• "In the unlikely event a major bank became insolvent the Government would ensure that the FSCS has access to enough immediate funding to pay out depositors in a timely manner, through borrowing from the Government or Bank of England. The FSCS could then levy up to £4 billion per year from the financial services industry to cover the costs of compensation"

In plain English, this means that in the unlikely event of a bank collapsing and requiring more than £4 billion of compensation, the FSCS would be meant the money to compensate consumers up to £35,000 each, and it would have to pay back to loan in subsequent years, by continuing levies.

So this means, the £35,000 limit is still the prime safety limit to rely on in your planning.

Meltdown_2

Could someone knowledgeable about these things please explain why Yvette Cooper was being asked the questions, rather than Kitty Ussher (Economic Secretary to the Treasury), who has responsibility for the FSA, retail banking, personal savings, etc.
I know of course that Yvette Cooper is in a more senior position, but she can hardly be expected to know the ins and outs of something for which she is not directly responsible.

moanymoany

I think I'm going nuts with all this discussion about safe savings, that here in Britain we are worrying about the safety of our money!

We are in a wonderful position - mind you the first time - and we are on the verge of retirement! We have just sold our house and are renting until we can buy our retirement home. WHERE DO WE PUT OUR MONEY?

I was surprised to discover that there are restrictions on how much can be transferred out of an online account, this would mean that if we had a quick purchase we could be in trouble.

So, do we open an account for every £35,000 we have? Can we take a punt on e.g. the Post Office 5.75% and put a big chunk in there? This article has not made things any clearer - although it gives essential information that we need.

So back to the beginning - what do we do?

baby_boomer

Associated Newspapers continue to stir the Icelandic issue.

On Monday the City Editor of the Evening Standard was wondering about the Icelandic economic miracle after a recent visit.

"Put simply there's nothing there (in Iceland)."

And he quoted the Chief Economist of the Icelandic Central Bank as saying:

"we're moving on very dangerous economic terrain.....it causes enormous problems to have such a big financial sector (banking) relative to the size of the economy." [The article suggests Icelandic Bank assets are 8x the size of the Icelandic economy.]

Blackhurst concludes:

"There is no way on earth...the Icelandic government can support a rescue if, God forbid, one of its banks were to go under."

___________

P.S. Iceland's inflation rate has leapt to 11.8%. Could this require even higher interest rates than the current 15.5% to support the Krona?

qwerty007

Banks have behaved criminally. I watched a documentary about predatory lending practices in the US, which highlighted the extent to which the most vulnerable are systematically, deliberately and mercilessly targeted by lenders. The most astonishing revelation (by the banks) was that if you removed the most vulnerable (mentally impaired, poor, students etc), from the equation, banks simply would not make profits. It was one of the most damning reports I have seen in the US ...more frightening than Al Gore's "An Inconvenient Truth". Since the US and the UK seem to shadow each other in so may ways, it would not surprise me to find out that UK lenders are guilty of the same predatory tendencies.

How much information is available in the UK on how deep this runs, I don't know, but in the US it is clear the credit crisis is far from over. The 'musical chairs' guessing game as to which banks are going to be left standing is a daily exercise. The US has FDIC insurance for cash of $100k, and SIPC insurance for securities of $500k, so spreading assets over several institutions is one strategy. Whether it is possible for UK investors to take advantage of this I don't know.

The economist is running an 18 page article on the banking dilemma, and points out that while governments may be willing to bailout national banks, what happens if the bank is a multinational?

Was Northern Rock actually bailed out? My understanding is that it received a loan, to continue writing business which is does through a Jersey charity, into an offshore company called Granite, and that servicing the loan is necessary for it's survival. Moreover, I believe it has moved all it's good business offshore and out of reach from account holders, creditors etc.

Writedowns are an indicator of who has been (might still be) exposed to the subprime crisis. Citibank and UBS were at the top of the list. HSBC, although took a hit early on seems to be less affected, as was Credit Suisse who admitted they saw the early warning signs and changed tack. Of course you can try asking your local bank whether it expects to be be hit by bad debt, but it would be a exercise in futility. Another indicator may be high interest accounts. If banks are offering very good rates, they may be trying to pool cash reserves to cover their exposure. Basically every bank will have some exposure and will be affected, but knowing which banks over-extended their lending, well beyond their reserve levels is impossible to know. Moreover, which banks bought CDO's and securitized mortgages from US banks is equally difficult to know. In fact, banks themselves don't know this which explains why they have been reluctant to lend to each other. As we know ratings agencies have been part of the problem, so whether ratings are going to be useful in assessing a bank's security is now questionable. The ease with which a bank allows you to transfer money (large amounts) out, may be a possible indicator.

My instincts would be to ferret out the more traditional, and conservative banks ...the house-hold names that have been around a long time, and ask them to demonstrate to your satisfaction that their exposure to risky lending is minimal. The longer they take in answering, and the more cream in spread over the top, the more anxious I would be. Small family-run Swiss banks are sometimes said to be secure, and less likely to be exposed, but transparency may be even more difficult in the case of these smaller banks. National banks in countries that have very tight lending regulations may be an interesting angle to pursue, but you may need to change to the local currency to get the best rates, which may themselves be less competitive. One final precaution I would take is to see if any insurers are willing to provide cover for lost savings.

qwerty007

The film I referred to on my above post was called Maxed Out. Although it was released in 2007 with rage reviews, it is currently on Showtime for anyone with access. Highly recommended!

LIDLUMS

Hello,
I'm new to this site and wish to ask a question.
As part of the Santander Group, is Abbey a stand alone company?
ie could it go under alone or would the whole group need to collapse.

Any answers would be appreciated. Thank-you.

timberman

Newbie post
Please bear with this first post - just so that I fully understand your assertions in the Article, if I choose to use NR to carry all savings (of whatever size), and which would include ISAs, Instant Access Savings and Fixed Bonds - the Govt backed NR guarantee would ensure full 100% repayment, at any time, to anyone following this course of action?

Regards to all

ianmr65

LIDLUMS wrote: »

Hello,
I'm new to this site and wish to ask a question.
As part of the Santander Group, is Abbey a stand alone company?
ie could it go under alone or would the whole group need to collapse.

Any answers would be appreciated. Thank-you.

No - abbey is a wholly owned subsidiary retail brand of the santander group.

the only possibilities are.

1) Santander as a whole collapses..taking abbey with it.
2) abbey as a brand is wound up by Santander, if it's losing money or cos they are bored with it, or whatever - accounts are transfered to another part of the group, or a new uk brand created.
3) abbey is sold off to another insititution, my guess would be RBS, as RBS and santander have close links.