Government guarantees Icesave savings

Wednesday, 08 October 2008

With the UK banking system in turmoil, the Government has come up with a £50bn rescue plan for eight of the biggest banks in the country. It is designed to bring some confidence back into the banking system, and get the banks moving again after the banking system has almost ground to a halt due to the lack of money circulating in the money markets.

One of the major concerns for over 50s – a good group of savers – has been that a bank or building society with which they have savings will “go under”. However, both Northern Rock and Bradford & Bingley have been rescued, and no savers have lost anything.

In addition, as from Tuesday, the Government has increased its guarantee for savings from £35,000 to £50,000.

Bad news came from further afield this week when Icelandic bank Icesave froze its accounts and savers could not access their own money. The Icelandic internet bank has about 300,000 customers in the UK, but said that it had no intention of honouring its obligations in the UK.

The Icelandic compensation scheme has no money, but the British scheme would top that up to £50,000. However, people with more money would still lose out.

The good news is that Chancellor Alistair Darling said: "I have decided in these exceptional circumstances that we will stand behind those depositors so they get their money back."

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