Plans to give savers extra protection

1 October 2008

It is expected that the upper limit on the amount of savings that will be safeguarded in the event of a bank or building society failing will rise from the current £35,000 to £50,000.

With the world’s banking system in increasing turmoil, the Prime Minister, Gordon Brown, said that the government would do “whatever is necessary” to protect people’s savings.

The Financial Services Authority is set to begin negotiations with the banks to raise the threshold at which deposits are guaranteed to £50,000.

It is thought that the present £35,000 ceiling covers 96 per cent of all deposits, while the proposed £50,000 limit would exclude just 2 per cent of savings accounts.

However, the UK government declined to follow the Irish government in guaranteeing the safety of all deposits in its major banks.

The Irish pledge is believed to be in breach of EU competition laws.

Mr Brown said: “Wherever there has been a problem, Northern Rock guaranteed the deposits of those people who were saving with Northern Rock, Bradford and Bingley safeguarded the deposits by moving them to Abbey National, Halifax Bank of Scotland moved them to Lloyds TSB.

“Wherever there has been a problem we have intervened and dealt with it. Let’s remember, the Irish are dealing with taxpayers’ money here. We have got to get what's right and also what’s reasonable and of course we look at every intervention that is necessary to take but I think people can see from our actions so far that depositors have been protected. No UK depositor has lost money.”