Savers deposit protection to be increased

The level of protection that savers in the UK receive on their deposits into savings accounts is to be increased according to a recent report. The government increased the 100% guarantee on savings to the first £35,000 of consumers’ savings late last year following the Northern Rock crisis, where savers flocked to withdraw billions of pounds in deposits over the space of a few days.

Plans have now been drawn up that could see the 100% guarantee on savers’ deposits apply to the first £50,000 of savings, which will give consumers increased peace of mind, and will help to avoid another Northern Rock situation in the event that a similar crisis arises with another bank.

Banks have been pleased to hear that they will not have to provide any upfront costs to fund the additional protection. One Treasury official said: “The Financial Services Authority (FSA) will explore with the financial sector ways for customers to cover amounts above the compensation limit and the appropriate coverage for client accounts and similar arrangements.”

The British Bankers’ Association said that pre-funding was not needed with this scheme, stating: “What we want is a system that works, that intervenes quickly, that frees deposits when necessary and has the ability to top up as and when required. None of that requires a pre-fund.”