Are your savings safe? article discussion

LongTermLurker

GustyGardenGalaxy wrote: »

Really? But surely once the merger is completed they will be classed as the same bank, therefore only £35K will be covered amongst all the savings (if said savings are over £35K and are split across multiple accounts)?

Nope, the limit is per institution, not per bank. HBOS is registered as one institution, and is comprised of Halifax, Bank of Scotland, Birmingham Midshires etc. They have chosen to register as a single institution so they only have one commitment to pay.

Conversely, Natwest and RBS group have registered separately, so are 2 institutions.

GustyGardenGalaxy

LongTermLurker wrote: »

Nope, the limit is per institution, not per bank. HBOS is registered as one institution, and is comprised of Halifax, Bank of Scotland, Birmingham Midshires etc. They have chosen to register as a single institution so they only have one commitment to pay.

Conversely, Natwest and RBS group have registered separately, so are 2 institutions.

Sorry, that's what I meant, just me using the wrong words.

BUT ......... once Lloyds and HBOS merge then they will become one institution and therefore have only one commitment to pay, correct?

LongTermLurker

GustyGardenGalaxy wrote: »

Sorry, that's what I meant, just me using the wrong words.

BUT ......... once Lloyds and HBOS merge then they will become one institution and therefore have only one commitment to pay, correct?

Not necessarily - RBS and Natwest are joined at the hip, but have chosen separate commitments. It will be LTSB's choice as to which way they go.

In all probability, they would combine the registration, but as Dunstonh says, it wwill be neither automatic nor immediate and will take a while to set up/change.

It's a bit like a marriage - you can choose a joint or separate accounts

GustyGardenGalaxy

I see, thanks!

IanMB

In relation to the advice about spreading one's savings around in £35k dollops, perhaps a note of mild caution:

As interest gets added to an account (usually, I suppose, once or twice a year), it'll naturally take the balance over the £35k limit and so would be lost if the institution foundered - so losing perhaps about £2100 on that amount for 1 year's interest at 6%. Easy enough to do if you don't watch your accounts regularly!

And of course many of the better-paying accounts have lock-in conditions that penalise you if you withdraw more than x times during a particular period, e.g. for transferring interest to another account to stay under the limit ...

chris1

IanMB wrote: »

In relation to the advice about spreading one's savings around in £35k dollops, perhaps a note of mild caution:

As interest gets added to an account (usually, I suppose, once or twice a year), it'll naturally take the balance over the £35k limit and so would be lost if the institution foundered - so losing perhaps about £2100 on that amount for 1 year's interest at 6%. Easy enough to do if you don't watch your accounts regularly!

And of course many of the better-paying accounts have lock-in conditions that penalise you if you withdraw more than x times during a particular period, e.g. for transferring interest to another account to stay under the limit ...

The answer is to keep only £33K in each account...

LongTermLurker

IanMB wrote: »

In relation to the advice about spreading one's savings around in £35k dollops, perhaps a note of mild caution:

As interest gets added to an account (usually, I suppose, once or twice a year), it'll naturally take the balance over the £35k limit and so would be lost if the institution foundered - so losing perhaps about £2100 on that amount for 1 year's interest at 6%. Easy enough to do if you don't watch your accounts regularly!

And of course many of the better-paying accounts have lock-in conditions that penalise you if you withdraw more than x times during a particular period, e.g. for transferring interest to another account to stay under the limit ...

Correct, it's been said many times, but worth repeating. As Chris1 says, you could make sure you leave space for interest.

I don't necessarily suggest everyone obeys the £35k rule - I'm more inclined to say you should diversify; if you have only £30k I'd still say it was best to split it between 2 accounts.

chris1

LongTermLurker wrote: »

...you should diversify; if you have only £30k I'd still say it was best to split it between 2 accounts.

I agree (and even for less than that) - it's not just a safety issue, there can be technical and logistical issues preventing you from accessing your money from a single organisation exactly when you want it, (for example problems with their systems (e.g. Abbey), or new rules on transfers brought in suddenly (e.g. Lloyds) or the unexpected need for a card reader (e.g. Tesco)).

Also, if the worst was to happen, it would probably be some time before you would be reimbursed by the FSCS.

sabretoothtigger

Alot of accounts used to let you transfer interest to another account/bank, probably still possible on request I reckon

IanMB

LongTermLurker wrote: »

... I don't necessarily suggest everyone obeys the £35k rule - I'm more inclined to say you should diversify; if you have only £30k I'd still say it was best to split it between 2 accounts.

I'd certainly agree with that - I've taken that approach ever since getting caught with a large lump of my ex-company pension in Equitable Life in 2000...