Nationwide savers can rest easy in the knowledge that their savings up to £50,000 remain safe, despite its mergers with Derbyshire and Cheshire building societies due to take place next month.
The reassurance came from the Financial Services Authority (FSA) yesterday as it announced that building societies which merge will keep their separate compensation limits.
The Financial Services Compensation Scheme (FSCS
) guarantees UK savers' cash to the value of £50,000 per FSA regulated financial institution, in the event of a bank or building society's collapse.
However, when a merge between building societies
occurs, they are legally required to act as a single entity under a single FSA authorisation, unlike banks, which is why the FSA has introduced the new compensation rule.
Commenting yesterday, FSA's retail markets managing director Jon Pain said: "Following mergers this will help existing savers with the societies who want to keep below the deposit protection limit and also reduce withdrawals from the successor society driven purely by compensation considerations on the part of savers."
Both Nationwide Building Society
and Yorkshire Building Society
, which is due to merge with Barnsley Building Society, have welcomed the new rule. Graham Beale, chief executive of Nationwide, said that a number of customers had been voicing concerns over the compensation limit and how it could affect their savings account
"We have been working hard with the regulator to come up with a solution that works for members of merged societies and are delighted that we can now ease customers' concerns," he said.
As a recession begins to take hold in the UK, a number of building society mergers are on the cards, and Kevin Mountford, head of banking at moneysupermarket.com adds:
"This is a sensible move by the FSCS. With a raft of society mergers feeding through, such as Scarborough and Skipton, savers with money in both totalling more than the £50,000 compensation limit would have had to look to move some of their money to stay under the compensation limit. And the last thing these newly combined societies need is an outflow of savings."
© Fair Investment