Savers now have guarantee on £50,000 of savings

Before the Northern Rock fiasco last year the level of consumer savings that received a full 100% guarantee from the government was just several thousand pounds. However, following the mass withdrawal of funds from Northern Rock by worried savers the government increased this 100% guarantee to the first £35,000 of savings.

With the turmoil in the financial markets appearing to go from bad to worse, the banking sector in a frenzy, and the Irish government increasing its safety net for savers, the UK government has recently announced that this guarantee has increased once more, and the 100% guarantee will now apply to the first £50,000 of savings.

An official from the Financial Services Authority said: “This change ties in with the introduction of the government’s Banking Bill in Parliament, which is due next week. It is also appropriate given the consolidation that has taken place in the banking sector.”

The compensation for savers is provided through the Financial Services Compensation Scheme, but the FSA is looking into whether the safety net should be increased further given the level of unrest in the banking sector and the low level of consumer confidence in banks.