After some speculation, the Government announced this week the end of their guarantee for savers at Northern Rock.
The unlimited savings guarantee will finish on 24th May 2010. After this date, savers with Northern Rock will fall back on the terms of the Financial Services Compensation Scheme (FSCS), should the bank go bust.
This means that individuals will have a compensation limit of £50,000 and a limit of £100,000 will apply to joint savings accounts.
However, the 24th May change to protection terms will not apply to Northern Rock savers in fixed term deposit accounts. They will continue to see their money fully guaranteed by the Government until the end of the fixed term.
Savers at Northern Rock with accounts valued in excess of £50,000 (or £100,000 for joint accounts) should consider spreading their money around to take full advantage of the Financial Services Compensation Scheme, if they are concerned about the security of their capital.
The only UK institution that continues to offer an unlimited guarantee to savers is National Savings & Investments, which is backed by HM Treasury. UK savers can also get an unlimited guarantee from a number of Irish banks, although this is only as good as the financial security of the Irish government.
Savers concerned about capital security are likely to have to trade interest rates for safety, with the rates on offer from National Savings substantially lower than those offered by Northern Rock and other banks.
