Bank compensation raised to £50,000 (From Haringey Independent)

Bank compensation raised to £50,000

3:50pm Friday 3rd October 2008

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The compensation limit available to savers who lose money when a bank goes under is being increased from £35,000 to £50,000, the City watchdog has said.

The Financial Services Authority said the Financial Services Compensation Scheme (FSCS) would also pay out up to £100,000 to couples with a joint account who lost money when a bank failed.

The new limit, which will come into force next Tuesday, ties in with the introduction of the Government's Banking Bill in Parliament next week.

The Government has been coming under increasing pressure to raise the limit this week after the Irish Government announced on Monday that it would guarantee all savings deposits held with an Irish institution for two years.

The move is believed to have sparked a flood of British money into Irish banks.

Website moneysupermarket.com said it had seen a three-fold increase in the number of people opening accounts with Ireland-based institutions during the first three days of this week, compared with the same period of last week.

There has also been a rush among savers to put their money with institutions that have a Government guarantee or that are perceived to be strong.

Nationalised group Northern Rock withdrew some of its savings products on Thursday after seeing "sizeable" inflows of cash in an attempt not to fall foul of its competitive commitments relating to its state ownership.

There have also been reports of savers flocking to banks such as Lloyds TSB and Abbey, which is owned by Spanish giant Santander, as well as to the Treasury-backed National Savings and Investments.

Prime Minister Gordon Brown announced plans to increase the limit of the FSCS earlier this week. The FSA had been running a consultation on the issue of increasing the limit, but its introduction was not expected so soon.

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