Are your savings safe? article discussion

mindymil

Oh dear, it's all very confusing for a granny. Today I went into Northern Rock and asked how safe it would be to put £200,000 into a l year bond. I was told that even if the government ceased to be involved with NR the day after I had invested, my money would still be safe and covered 100% until maturity. Hmm, I wonder if that is so.
The girl advised me that there is, of course, no mention of the 100% cover in their literature because it is the government rather than NR that is giving the guarantee. NR's is only the usual £50,000. What to do I wonder?

MarkyMarkD

You should report that member of staff to Northern Rock, and you should report Northern Rock to the FSA.

The girl's comment that the 100% cover is not mentioned because it's not guaranteed by NR is completely ridiculous. The FSCS guarantee offered by any institution is not guaranteed by the institution either.

Stavros_3

I notice that ING are currently at the top of the lists for best rates, My only concern is that its a foreign bank, does anyone know what their rating is? cheers

I-LOV-MONEY

Stavros wrote: »

I notice that ING are currently at the top of the lists for best rates, My only concern is that its a foreign bank, does anyone know what their rating is? cheers

I belive they are covered by the Financial Protection guarantee.

MarkyMarkD

tsmlion wrote: »

Northern Rock deposits are guaranteed by the Government.

If you place your money in Northern Rock it is 100% safe.

If you place your money in another bank your money is not 100% safe. Politically the Govt would find it hard not to step in but there is no obligation.

If a rogue trader, or negligent board of a bank recklessly lost shedloads of money the political pressure to step in would not be so high.

There was a small Scottish building society which was allowed to fail so it is not a given that any institution would be saved.

It was thought Lehmans would be bailed out and they had massive political influence.

I'm no fan of Martin Lewis but you can't pick holes in what he has said on this topic.

Nobody who had the money invested in "a small Scottish building society" (actually the LARGEST Scottish building society) lost a penny. No different to anyone who invests in Northern Rock.

Your argument is totally incorrect. Nobody investing in Northern Rock is any safer than anyone investing anywhere else with a UK bank or building society. Any theoretical better guarantee applying at the minute cannot be guaranteed to last throughout the term of a fixed term bond.

LongTermLurker

stv1x wrote: »

Then you believe that 100% protection on funds deposited in NR, as suggested by this site, is potentially incorrect for Fixed Rate Bonds?

Some clarification by MSE on this anomoly would be appreciated which I believe was the point made by MarkyMarkD.

No, at the moment, all deposits in NR are 100% protected - but I believe that will end at some point in the (not too distant?) future. Until then, they remain 100% protected.

I think the important thing to understand is that nothing is guaranteed forever.

MarkyMarkD: Your argument is totally incorrect. Nobody investing in Northern Rock is any safer than anyone investing anywhere else with a UK bank or building society. Any theoretical better guarantee applying at the minute cannot be guaranteed to last throughout the term of a fixed term bond.

Edit - I posted the above before seeing MMD's response, so I guess we agree - but I still think that anyone saving/depositing (you can't invest in a Government-owned company ) with NR are currently safer than someone saving elsewhere - until it's changed, you are guaranteed 100% cover in NR, but you only might get 100% cover elsewhere, at the Government's whim. This site tells you about the best deals now, not future maybes.

stv1x

LongTermLurker wrote: »

No, at the moment, all deposits in NR are 100% protected - but I believe that will end at some point in the (not too distant?) future. Until then, they remain 100% protected.

I'm afraid that the above statement is about as ambiguous as the terms in which NR's bonds are invested under. For clarity; if one invests more than £50k into NR's one year bond then on one hand you are suggesting that it is 100% safe and yet, on the other hand, suggesting that if they sell to a third party it isn't? Please bear in mind the terms of their one year bond which states quite clearly that strictly no withdrawals are permitted during the term. Once opened then you are locked in for the duration regardless of what happens to NR. It's either safe or it isn't . Timing of the potential sale should be publicly disclosed with immediate effect but the cynic in me tells me that's not going to happen.

NR, with the backing of this site, appear to be using the government guarantees to give investors a false sense of security for the purpose of obtaining a higher valuation when the time comes to sell. If they do sell NR then there will be plenty of savers out there chewing their nails until such time withdrawals are permitted under the terms of the bond.

LongTermLurker

@stv1x - of course, you're right. I was just playing devil's advocate. The answer is, I don't know. I would have thought they would have to honour the original guaranteed additional protection until the last of the FTDs had matured, but that's just speculation.

On the other hand, going back to the start of the conversation, if NR was sold with your £100k deposit in tow and subsequently found itself in the same situation as last year, would the government dive in a second time? I suspect so. Anyone remember BASIC?

10 IF NOT bank-collapse-imminent GOTO 40
20 IF bank-not-important-enough OR government-embarrassed GOTO 60
30 rescue-bank
40 print "WOOHOO! ";
50 wait 2592000
50 GOTO 10
60 print "OOPS! ";
70 END

MarkyMarkD

But the "government diving in a second time" is no different to what they would do in respect of any other financial institution.

Simply because NR was at one point in time government-owned and government-guaranteed does not mean that it always will be. As simple as that.

But equally well, no other institution is going to fail without the government bailing them out. Irrespective of the over-egged £50k limit.

Which is my entire point. NR is no safer than anyone else, when it comes to investing for the long term in a product with no withdrawals allowed.

It is STILL better for short-term, easy access, investing, because you could always withdraw your money when a sale was announced and the guarantee was about to end. But that's not what Martin was recommending.

Where on earth is he, anyway? It's a shame when he starts a thread like this and then goes AWOL when it doesn't agree with him.

MarkyMarkD

Are you not listening?

A government guarantee based on their PRESENT government ownership is completely useless if the government sell them off, two months after you put your money into a 1 year bond with no withdrawal options, let alone an even longer-term investment.

I am not querying the purported value, RIGHT NOW, of the guarantee. I am simply pointing out that to use it as a reason to choose one institution over another, for a fixed term product, is pretty silly.

And the true value of the guarantee is pretty much nothing, as you get the same implicit guarantee investing anywhere else.