- Six out of 10 want compensation increased, says MoneyExpert.com
Savers are demanding the authorities increase the level of compensation paid when a bank goes bust after the Northern Rock crisis dramatically highlighted the risks to cash in the event of a collapse, new research* from MoneyExpert.com shows. Currently the Financial Services Compensation Scheme guarantees only the first £31,700 of savers’ deposits.
And the research shows 44 per cent of adults now do not trust the Government, Financial Services Authority and Bank of England to protect their savings in the event of another Northern Rock-style bank run.
The independent financial comparison website’s research was conducted as the Northern Rock crisis unfolded and while the Bank of England and Chancellor of the Exchequer Alistair Darling launched successful rescue attempts involving guarantees to all savers.
It shows 60 per cent of adults want the levels of compensation paid in the event of a bank crash increased and that nearly half of them do not trust the authorities to handle a crisis.
Sean Gardner, Chief Executive of MoneyExpert.com, said: "We are always told that savings accounts are risk-free but after Northern Rock many people are not too convinced about that.
"The Northern Rock crisis has been a massive shock to the system and has highlighted that the compensation scheme currently in place needs to be overhauled. Many Northern Rock savers had deposits of much more than £33,000 and would have suffered serious problems if the bank had gone under.
"Customers definitely agree that the authorities need to act on increasing the level of guarantees in the event of a bank crash. Northern Rock may have been a one-off but people believe it’s better to be safe than sorry.
"This poll shows many people are not convinced that the levels of protection currently in place are sufficient – which explains why so many people don’t trust the Government to guarantee their savings at all."
The Government currently guarantees the first £2,000 of everyone’s savings in case a bank or building society goes bust under the Financial Services Compensation Scheme (FSCS). After that it will repay 90% of a saver’s first £33,000, leaving a maximum compensation cheque of £31,700. Anyone with savings beyond that figure left with the same bank would lose the remaining cash forever. According to the MoneyExpert.com research, 46 per cent of adults were unaware of the FSCS protection.
Sean Gardner added: "The current compensation scheme encourages savers to spread their savings across many different providers. Anyone who has more than £33,000 in the same account must be wondering whether they should switch some of it to a different bank just to spread the risk.
"Of course, the chances of any major bank going bust are limited – the Bank of England has already shown the lengths it is prepared to go to in order to keep them afloat.
"However it’s good practice to spread your investments if you do have a lot of cash to save – so it’s always worth shopping around to get the best deal for you."
A reported £3 billion in savings has been withdrawn by panicking Northern Rock customers over the past week. National Savings and Investments immediately reported an upturn in deposits, although the destination of the majority of the Northern Rock cash remains unclear.
Compare savings accounts now
*TNS interviewed 1001 GB Adults on 18th – 20th September 2007.