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£4.5billion up for grabs from Icesave savings accounts

07 November 2008 / by Rachael Stiles
Savings accounts providers should be vying for the attention and deposits of customers of Icesave, the UK savings arm of Landsbanki, the collapsed and now nationalised Icelandic bank, as they look for alternatives for saving their £4.5billion.

Icesave was constantly topping the best buy savings accounts tables before it was declared to be in default on October 8, and there is now a gap in the market, says Andrew Hagger of, which other providers might do well to bear in mind when they are re-pricing their savings range.

There were several providers offering seven per cent or more on fixed rate savings accounts, but they are now long gone, Mr Hagger said, and the majority of variable rate savings accounts look less attractive after October's half a percentage point base rate cut.

"With a further hefty rate cut on the agenda today it is likely that savings interest rates will take another hit." he predicts. "However with the cost of LIBOR still reportedly at a prohibitive level and a lack of wholesale funds still an issue, perhaps one or two providers may position their products in an attempt to attract a slice of the funds coming back from Icesave accounts."

Since the world economy started to wobble and savers realised that their savings are not necessarily safer in a bank than they are under the mattress, there has been a shift in priorities when choosing a savings account, from looking for the highest rate to seeking out those which offer the most security.

Savings accounts which offer a 100 per cent guarantee have proven hugely popular in these uncertain times, such as those which come under the Bank of Ireland since the Irish Government said it would protect all savers' deposits.

Savers' fears was also calmed somewhat by the Treasury announcing recently that it has increased the level of compensation available from the Financial Services Compensation Scheme from £35,000 to £50,000.

Finding a better than average return will still be important to savers, Mr Hagger believes, and they can compare savings accounts to find the best rates.

© Fair Investment Company Ltd