Are your savings safe? article discussion

Rednoseranter

BRAND678 wrote: »

Hi could you please let me know how safe my money/shares are if my execution only broker goes bankrupt? I guess any cash would be safe up to £50000 but how about shares over £100000? Would my shares with the broker only be covered up to £48000 and if so am I better off getting my shares over £48000 out of the broker account and keeping them in paper form at home or with another broker? Or would all my shares still be safe. Thanks.

I believe that I'm right in thinking that "brokers" are covered by the Client Money Rules and not the FSCS i.e. everything is held in a 'client account' by the broker which in the event that he goes bust does not constitute part of the brokers assets and therefore are returned 100% to the clients.

boothie15

Dear MSE

In the highly unlikely event of total collapse of a bank that one has a £150k mortgage offset against £270k savings, would the scenario be post-bust that only £85k of savings would be guaranteed, but I'd still be left with the £150k mortgage outstanding?

I have heard that the mortgage and the opposite amount in savings, in this case £150k, would "cancel" each other out and that the remaining £120k suplus would only be guaranteed to the tune of £85k, meaning mogage is paid off and £85k savings is safe. But this is vehemently denied by an accountant friend who reckons it's the former not the latter scenario outlined above.

What is the correct answer?

Many thanks
IDB

stphnstevey

Anyone know whats happening with Anglo Irish Bank with all the Irish crisis?

MarkyMarkD

boothie15 wrote: »

Dear MSE

In the highly unlikely event of total collapse of a bank that one has a £150k mortgage offset against £270k savings, would the scenario be post-bust that only £85k of savings would be guaranteed, but I'd still be left with the £150k mortgage outstanding?

I have heard that the mortgage and the opposite amount in savings, in this case £150k, would "cancel" each other out and that the remaining £120k suplus would only be guaranteed to the tune of £85k, meaning mogage is paid off and £85k savings is safe. But this is vehemently denied by an accountant friend who reckons it's the former not the latter scenario outlined above.

What is the correct answer?

Many thanks
IDB

The latter. The net amount you are owed by the institution is calculated first - so that's £120k - and then that is only covered to the first £50k (at present).

The offset rules are changing from 31 December 2010, but my understanding is that it actually makes matters worse! The idea is to make it fairer for those with (say) a £25k savings account and a £25k mortgage, who under the offset rules would lose access to their savings (albeit that they would also have their mortgage cleared). Fine for them. But in your situation, they would look at the £270k - and give you just £85k - but you'd still remain liable for the full £150k mortgage.

However, I don't see why the right of offset doesn't apply to you as much as it does to them, in which case you should get £85k in cash from FSCS but have the remaining £185k offset against the mortgage - and hence the mortgage cleared.

I think that you should ask FSCS how this will work.

bendipa

stphnstevey wrote: »

Anyone know whats happening with Anglo Irish Bank with all the Irish crisis?

Anglo Irish is a nationalised bank and therefore only if the government defaults is there a danger of savers losing their money, but then there is still the Irish Depositors Protection Scheme, that guarantees up to €100,000 of individual savings. Anglo Irish savers need not worry now anyway as the EU/IMF bail-out will safely cover the Irish government's financial liabilities for a few years, and even without that bail-out, your savings would still probably be safe for another year.

John_Pierpoint

As I see it the whole Western World is going to default slowly in the form of printing money and stoking up inflation.

There are still living Germans who can remember this happening after WW1 (they lost the war and the peace) - The UK struggled on trying to pretend it was business as usual. The USA, where the debts should have been manageable, though they did lose a chunk of population in its prime to flu and a lesser extent war deaths, had a massive bubble economy. Both the UK and USA had to get together to break the gold speculators.

After WW2 the USA, should have been sitting pretty with a lot of the rest of the world owing it money and only 5% of its GDP flowing across the borders of N. America, BUT it decided to "invest" a similar sum fighting in Vietnam. Those liabilities tended to be inflated away.

The UK, especially in the 1970's inflated away its debts down to 10% of their former value (becoming the IMF administered "sick man of Europe").
The UK enjoyed a brief period in the sun as N.Sea oil paid off the remaining debts; but its government chose to allow its economy to party along side the USA, which cashed in on its status as a reserve currency.

So far the Western governments have nationalised the debts to prevent their economies from grinding to a stand still.

I challenge anyone to forecast the outcome over the next 5 years, especially in Euro land. Some countries in Euroland cannot pay their debts (and borrowing more money at 5% plus isn't going to help much.)

All I can say is:

If you savings are under £ 50/84K you should be protected for the main part.
If you are young talented and Irish think about emigration, while you still can.
If you are young & British, how about learning Mandarin Chinese - start now by saying "ma" (as in a short form of mother) with 4 different intonations. Failing that German might come in useful.

Personally I would avoid a bank like this one, as not being worth the potential extra stress, but hey that is what I said to my wife when she opened accounts in Iceland.

http://en.wikipedia.org/wiki/Anglo_Irish_Bank

stphnstevey

bendipa wrote: »

Anglo Irish is a nationalised bank and therefore only if the government defaults is there a danger of savers losing their money, but then there is still the Irish Depositors Protection Scheme, that guarantees up to €100,000 of individual savings. Anglo Irish savers need not worry now anyway as the EU/IMF bail-out will safely cover the Irish government's financial liabilities for a few years, and even without that bail-out, your savings would still probably be safe for another year.

But whats happening to the bank itself?

John_Pierpoint

Banking is a con trick, in that the bank lends out a lot (x8 ?) more than its deposits - so every bank is secure and stable and rich, until its depositors decide to move their deposits.
Some have money on demand some do not.

There is no such thing as absolute security in this life.

All of us with savings are being "taxed by inflation" and by Income tax at a rate that reduces our wealth by about 2.5% a year, if we are lucky.

72 / 2,5 = 28.8 years. In less than a generation half of our savings will have disappeared, if things carry on like this and we spend none of the interest. Feel free to plug in your own forecast for the future of interest rates, tax and inflation.

calypso_rhapsody

Re posts 853 and 855 - i believe that this is a subtle change that will be introduced in January.

At present the FSCS protection does apply to the net position if you have an offset mortgage but, according to a report in the Sunday Times a few weeks ago, this will change in January when the new limit is brought in and the £85k will apply to the gross savings (or £170k if it's a joint account). So in the case boothie15 poses, only £85k of the 270k savings would be protected (unless it's a joint account) and the mortgage would still be due.

I should say that i have not verified the information in the Sunday Times article but i did post a message somewhere on this forum (no doubt if you search you will find it). There were several mortgage brokers quoted in the article. It is a very significant reduction in protection which is not being properly communicated to those affected.

Assuming that the ST article was correct, Boothie would be well advised to use his savings to pay off (or reduce) his mortgage if he is able to do so - or to move the savings elsewhere if not.

I-LOV-MONEY

John_Pierpoint wrote: »

Banking is a con trick,

Not as much as insurance companies. You buy insurance to protect yourself against something that you hope won't happen. If you should use it, your are penalised (increased premiums next year).

Car insurance is even worse. You hope you won't have to use it, but just in case you do so, you can protect yourself again by taking out further insurance (protect NCD). I am sure the real premium is what you pay after you take off the NCD. So you pay more, because you dared to use their service which you have paid for.