Are our savings at risk in banks?

WE have been inundated with letters from readers worried about the safety of their money – here are responses to some of them:

IAM aware there are limits on compensation under the Financial Services Compensation Scheme (FSCS). As well as savings deposits with HBOS, I also have (1) an Isa Investor from HBOS Investment Fund Managers Ltd, and (2) a Personal Investment Plan from St Andrew's Life Assurance plc (part of the HBOS Group). In total I have about £80,000 in these two funds.

The small print says compensation under the FSCS is limited to £48,000. I'm confused. Is that for each fund or both together? And what about my deposits? Is my money safe?

DS (by e-mail)

Tom McPhail,Hargreaves Lansdown's head of pensions research, writes:

ONE of the issues emerging from the recent turmoil on the financial markets is that the FSCS typically covers holdings with the parent organisation rather than with the individual subsidiary companies. So if HBOS were to go bust you could potentially find that the fact that you had investments spread across different companies within the HBOS group would be of little benefit to you.

The good news is twofold, though. Firstly, the chances of having to make a claim really are slim, particularly after last week's intervention by the Government. We are in uncharted waters here, but not only has the Government, in conjunction with the regulators, made sure that depositors and account holders have been protected so far; in addition there is considerable political and financial momentum to ensure that the HBOS and Lloyds TSB deal does go through.

Secondly, your deposits and your investments are treated separately for FSCS purposes. So you would be eligible to claim up to £50,000 (raised on October 7 from the previous limit of £35,000) under the deposit protection scheme, and in addition you would be able to claim up to £48,000 under the investment protection scheme.

How secure is Standard Life?

I HAVE funds on deposit with Standard Life Bank. How can I find out how safe these funds are or whether I should cut the amount to £50,000 and transfer the rest elsewhere?

TM (by e-mail)

Moneyfacts' Michelle Slade writes:

THERE is nothing to suggest Standard Life Bank is in any trouble, and the banking system has been strengthened by the Government's announcements last week, but if you want 100% protection for your money it may be worth ensuring you have no more than £50,000 with any one deposit taking provider.

Can funds be lost during a transfer?

IN THESE troubled financial times, people are electronically shifting savings around looking for a safer haven. Please clarify what happens in the event of a financial collapse of one or both institutions involved during the transfer of funds. How or who guarantees your funds, and how could you prove it took place?

AJ (by e-mail)

Moneyfacts' Michelle Slade writes:

WHEN you transfer money, the responsibility for it remains with the original provider until it has cleared with the new one.

If both or either of the banks collapsed, it would therefore depend on how far into the process the transferring of funds was as to whose responsibility the money would be, but there would not be a period when your money isn't covered.

Does Ireland cover Post Office money?

IN THE list 'Who Runs Who' in Scotland on Sunday on October 5 I noticed "Post Office Financial Services". Is this part of Royal Mail or is it an Irish bank? Is it covered by the Irish government's guarantee?

MM (by e-mail)

Moneyfacts' Michelle Slade writes:

POST Office Financial Services is owned by the Royal Mail but is operated by Bank of Ireland (GB). The Irish government has stated that for the next two years savers will receive 100% of their money back if selected Irish banks get in to trouble.

This guarantee covers Bank of Ireland (GB) and in turn covers all deposits invested at the Post Office.

Should my wife go Dutch or switch?

MY wife has had an ING savings account for some years now, attracted originally by the good interest rate. I understand that it is part-Dutch and hence would come under both British and European compensation systems in the event of their crashing.

Should she quickly shift all her money into a British savings 'institution' to simplify things and, if so, which one? The Post Office seems reasonable. Or, should she sit tight and wait with fingers crossed?

IM (by e-mail)

Moneyfacts' savings expert Michelle Slade writes:

ING Direct is covered under the Dutch Deposit Guarantee Scheme, which covers your savings up to ?100,000 (approximately £77,000), higher than the UK compensation scheme. If ING Direct was to get into trouble, you would have to claim your money back under the Dutch scheme.

Whether you wish to leave the investment where it is will depend on your view as to whether the bank, which is very strong, might get into difficulties, and, if it did, on the likelihood that the Dutch compensation scheme would be able to meet its commitments. As we have seen with the Icelandic banks the priority of authorities is likely to be to safeguard their local customers.

If you wish to change providers and it is likely you are not getting the best rate you can from ING, then look for an account that pays the best rate on an account which most suits your needs. Moneyfacts.co.uk has a search facility where you can put in your personal details and it will show suitable accounts to match your criteria.