STOP PRESS: the Government has said it will compensate all Ice Save depositors in full. 

In a separate move, ING Direct will acquire £2.5bn of deposits held by 160,000 customers from Kaupthing Edge, the internet-only UK retail arm of Iceland’s biggest bank.

ING Direct is also taking control of £538m of savings held by 22,200 people with Heritable Bank, which was run by Iceland’s Landsbanki - Icesave’s owner.

With the collapse of Iceland’s second largest bank, Landsbanki, yesterday the grim reality of the credit crunch is starting to hurt British savers for the first time in a real way.

Some 300,000 UK savers have an average deposit of £15,000 in Landsbanki’s popular IceSave account which featured regularly in the best buy tables.

Under the deposit protection arrangements in Iceland, the Icelandic authorities would normally pay depositors the first €20,887 of compensation (£16,300), while the UK’s Financial Services Compensation Scheme (FSCS) would make up the rest of any claim up to the increased limit of £50,000 (which luckily came into effect yesterday).

But this morning, the Chancellor, Alistair Darling said that the Icelandic compensation scheme had no money in it and that the UK government would pick up the tab and compensate UK savers in full.

 This latest collapse brings home to UK savers the fact that foreign-owned banks can make claiming compensation a more complicated and risky process.

In the Defaqto term accounts best buy table on Tuesday (prior to the announcement of Landsbanki’s collapse), no fewer than seven of the accounts listed were from non-UK banks http://www.defaqto.com/consumer/savings-accounts/term-accounts.aspx.

Of these two were from Anglo Irish Bank, which now enjoy a 100 per cent guarantee from the Irish government. But three of the accounts were Landsbanki IceSave accounts, one was from Dutch-owned AK Bank NV and one was provided by the Indian bank ICICI.

While there is nothing inherently wrong with saving in a foreign-owned bank, depositors should check what the arrangements would be if anything went wrong. Levels of compensation vary from country to country and their authorisation.

To date, however, the UK Government has compensated depositors in full.

For more on the FSCS:
www.fscs.org.uk
Why not invest regularly with a mutual building society:
http://www.defaqto.com/consumer/savings-accounts/regular-savings-accounts.aspx

With hardly a day passing without a bank collapsing or needing to be rescued, you could be forgiven for wondering whether there are any financial institutions left where you can safely deposit your hard earned cash.

If you want a copper-bottomed guarantee of security, there isn’t much to beat National Savings & Investments (NS&I)  www.nsandi.com/which offers a range of taxable, tax-free and index-linked certificates and premium bonds.

It does not offer a traditional bank-type account with cheque book but its Easy Access savings account provides a cash card which can be used to withdraw money at ATMs.

Northern Rock savings accounts (http://www.northernrock.co.uk)  are also guaranteed by the Government, at least  until further notice, so you could put your money with it for the time being until it is sold off or wound up.

A third option is certain Irish banks and building societies following the Irish government’s announcement that it will guarantee the safety of all deposits in six of its principal savings institutions.

The latter are the Bank of Ireland, Allied Irish Bank (AIB), Anglo Irish Bank (AIB) and two building societies -  the Educational and the Irish Nationwide. The sixth is Irish Life and Permanent, Ireland’s largest life insurance company.
 
The guarantee lasts for the next two years and AIB, Anglo Irish Bank and the Bank of Ireland all have branches in the UK.

The announcement by the Irish Department of Finance appears to cover all depositors of these institutuions, even for those located outside Ireland.

Anglo Irish Bank has been actively seeking deposits from savers in England and Scotland for the last two years, with competitive rates of interest on its Easy Access, 7 Day account and nine month bond. It was adamant yesterday that the safety guarantee applied to all depositors, irrespective of their location.

Bank of Ireland has 46 branches in Northern Ireland and 11 offices in England and Scotland. It also runs the financial services division of the UK Post Office and has about 1.5m customers with deposit accounts through this brand.

Anglo Irish Bank has seven branches in England and Scotland, while Allied Irish Bank has 27 branches in England, Scotland and Wales and 47 in Northern Ireland.

Defaqto banking principal David Black, says:  “It’s a great move on the part of the Irish government to instill confidence. Anglo Irish Bank has had consistently competitive rates in recent years.” 

For top paying savings accounts visit:
http://www.defaqto.com/consumer/savings-accounts/instant-access-accounts.aspx
http://www.defaqto.com/consumer/savings-accounts/notice-savings-accounts.aspx
http://www.defaqto.com/consumer/savings-accounts/regular-savings-accounts.aspx
http://www.defaqto.com/consumer/savings-accounts/childrens-

www.angloirishbank.co.uk
http://www.bank-of-ireland.co.uk/
http://www.aib.ie/servlet/ContentServer?pagename=AIB_Ireland/IHPHomepage

You think it will never happen to you, and then it does.

While withdrawing money from a cash machine a few weeks ago, a man approached me saying that it had just swallowed his card.

I told him to go away, thinking that he was going to grab the cash when it came out, but lo and behold, no cash was forthcoming and the machine refused to return my card.

Having waited a few minutes to see if machine might change its mind, I walked away thinking nothing of it.
 
On reporting the incident to my bank the next day, I was told that the card wasn’t in the machine and must have been stolen - probably by the man who had approached me and who had got my PIN by shoulder surfing when he spoke to me.

To my horror, he had swiped a cool £1,000 from my account in the space of a few hours - £600 in cash and £400 in shop purchases.

APACS, the UK payment association says that £35m was lost through cash machine fraud in 200.

Sandra Quinn of  APACS, says: “The three principal methods criminals use to steal cards and card details at cash machines are card-trapping devices, whereby the fraudster inserts a card catcher device into the card slot; skimming from the magnetic stripe at cash machines and shoulder-surfing, whereby the fraudster observes the cardholder inputting their PIN and then uses distraction techniques to steal the card.”
 
By UK fraud standards, my experience was small beer. I know people who have had their entire identity stolen and had mortgages, personal loans and credit cards taken out in their name for months before they have even become aware of it.

Trying to unravel that sort of  fraud is a nightmare and can take months, if not years, to sort out.

In my own case, I had to make numerous calls to the bank’s call centre, just to report the loss of the card. I then had to visit my branch, complete two forms (one of which I had to wait to come in the post). Having done all that, I am still awaiting a refund.

The upshot is that I won’t be withdrawing any money from street-side ATMs anymore. I’ll stick to the cash machines inside branches during banking hours.

For more on card protection and identity fraud:

http://www.defaqto.com/consumer/credit-cards/card-protection.aspx
http://www.defaqto.com/consumer/credit-cards/guide-identity-theft-insurance.aspx

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