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£500bn in savings accounts left unprotected by Government guarantee

03 October 2008 / by Rachael Stiles
There is almost £500billion in personal savings accounts that would not be protected by the Government guarantee if the banks holding the accounts collapsed.

The level of protection currently offered to savers if their bank goes under is £35,000; Gordon Brown has said that this will rise to £50,000 in the near future, which, the Treasury says, will protect 98 per cent of savers.

However, research from investment bank Credit Suisse has found that those two per cent of customers whose savings accounts would not be entirely covered hold almost half of the entire deposits in the UK.

According to the bank, at least 40 per cent of deposits are higher than £50,000, which means that of the total amount in savings accounts in the UK, £468billion will be unprotected under the new threshold.

The Prime Minister is being urged to introduce a guarantee like that announced in Ireland this week, whereby the Irish Government has guaranteed 100 per cent of savers' deposits in order to prevent customers from withdrawing their money and rocking the banking boat further.

The trouble in the banking system has caused throngs of customers to move their savings to one of the secure accounts which exist, where all of the deposits are safe, like those which come under the Irish banking rules, such as Post Office savings accounts, or Northern Rock savings accounts, which are guaranteed because the Government owns it.

However, so many people moved their money to the nationalised bank this week, a total of £4billion, that the bank has had to withdraw most of its savings range to avoid going outside the terms of its nationalisation, which state that it must not take more than a 1.5 per cent of the market share to avoid its Government guarantee giving it an unfair advantage.

High street banks have called for urgent action from the Government because they feel they are at an unfair disadvantage compared to banks that can offer their customers a 100 per cent guarantee.

National Savings & Investment has also seen a huge influx into its savings accounts, taking in more than £1billion in the last several months as the British people look for security in these uncertain times.

© Fair Investment Company Ltd