PROPOSALS for an improved safety net for savers have been announced by the government. But consumer groups have claimed the measures fail to sufficiently protect savers and should be more comprehensive.
The need for better saver protection was highlighted by the run on Northern Rock last September, when thousands of its customers withdrew their savings when the bank ran into difficulties.
Under the proposals, unveiled by the Chancellor, Alistair
Darling, the level of compensation for guaranteed deposits would rise from £35,000 to £50,000.
Any debts savers have to failed institutions may be discounted when calculating compensation. Under the current arrangement, mortgages and other debts can be factored in to offset compensation paid.
Banks would not need to fund the measures up-front, but would instead be called upon in the event of any problems. "We support the suggestions not to move to a pre-funding of the depositor protection scheme, at least at this stage, as this would take ages to build up to an amount which would deal with a failure of any size," said John Cridland, deputy director-general of the Confederation of British Industry.
However Which? criticised the proposals for covering only banks, and not brands. It cited the example of savers who may have accounts with both Halifax and Bank of Scotland but would only get one payout as they are part of the same group. It also said that the proposed seven-day turnaround for payouts was too long, suggesting a three-day compensation window instead.
In addition, Which? suggested that savers should be automatically protected above the normal compensation where they have an amount above £50,000 temporarily sitting in an account, such as during a house sale or from a pension or insurance lump sum payment.
The full article contains 300 words and appears in The Scotsman newspaper.
