September 19, 2008 | posted by Pam Atherton in Banking, Savings |

The shotgun takeover of HBOS by Lloyds TSB has sent shock waves throughout the nation as everyone worries about the fate of their savings and deposits.

 With 30m customers between them, there can’t be many adults in the UK who don’t have a financial relationship with one, or both, of these institutions.

While most people have welcomed the stability (albeit probably temporary) that this decisive move has provided, the question on everyone’s lips is: “Are my savings safe?”

The Government’s role in encouraging the takeover is a positive signal that it will stand behind the new merged institution, come what may.

After all, what Government wants to see millions of customers besieging Halifax branches for the return of £260bn in retail deposits? It doesn’t bear thinking about.

That said, cash deposits are only protected up to £35,000 under the Financial Services Compensation Scheme and then only  “per authorised institution,” not “per account.”

This situation was already unsatisfactory, even before the takeover of HBOS by Lloyds TSB because it already owns a whole slew of brands which all come under  one FSA authorisation. 

These include Halifax, Birmingham Midshires, Saga, Intelligent Finance, Saga and the AA.

This means that if you have savings with any of these institutions, the maximum you could claim in the event of their demise would be £35,000 in total, not £35,000 per brand.

Elsewhere, Lloyds TSB and Cheltenham are jointly authorised, as are First Direct and HSBC, Yorkshire and Clydesdale banks, Abbey and Cahoot, Bank of Ireland and the Post Office, the Co-op and Smile.

The exceptions are Royal Bank of Scotland which is separately authorised from Nat West, and Abbey which is independent of Cater Allen, its private bank.

So not much comfort if you have large deposits with most of these banks.

Defaqto banking consultant, David Black, recommends that savers limit their deposits to around £33,000 per authorised institution 
because the FSCS will pay interest up to the date of closure.

If you want to check out the authorisation status of a financial insitution, visit:

http://www.fsa.gov.uk/register/home.do

Check out the best instant access accounts:
http://www.defaqto.com/consumer/savings-accounts/instant-access-accounts.aspx
Best regular savings rates:
http://www.defaqto.com/consumer/savings-accounts/regular-savings-accounts.aspx