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

The Office of Fair Trading (OFT) has written to the main UK retail banks stating that their overdraft charges are ‘probably unfair,’ as part of  its ongoing investigation into default charges.

In April , the High Court ruled that the OFT had the right to scrutinise the fairness of banks’ current account charges, following claims by hundreds of thousands of disgruntled bank customers that they had been charged excessive amounts for going into the red.

Many of these claims ended up in the small claims courts, triggering chaos because each case had to be judged on its own merits as county court judgements do not set a precedent.

The OFT says it has written to all the banks whose charges it has been investigating in order to start a dialogue and to ascertain which issues may need to be resolved in court.

Pending the outcome of the OFT’s legal challenge, all pending bank charge complaints have been put on hold and customers can expect years of legal wrangling because four more High Court decisions are yet to come.

These include a High Court  ruling, which is expected soon, as to whether the OFT can also investigate the fairness of overdraft charges levied by banks in the past and whether these were unfair penalties under common law and under the 1999 Unfair Terms in Consumer Contracts regulations.

The banks, meanwhile, are to appeal in October against the OFT’s initial High Court victory in April and in late 2008 or earl 2009, a High Court hearing is expected to consider whether bank overdraft charges are unfair.

An earlier investigation by the OFT into bank accounts generally found that overdraft charges generated an income for the banks of £2.6bn a year.

In the meantime, if you are fed up with your bank, switching accounts has never been easier. For details on the deadlines which banks must adhere to when you ask to switch banks,  see page 11 of the banking code:
http://www.bankingcode.org.uk/pdfdocs/PERSONAL_CODE_2008.PDF

To compare accounts, visit Defaqto’s unique Compare Tool:
http://www.defaqto.com/consumer/current-accounts/compare-current-accounts.aspx

Kauphting Edge’s online account is currently paying 6.55 per cent AER:
http://www.kaupthingedge.co.uk/

Retail banks are in trouble again with the Office of Fair Trading  -   this time over current accounts, with the watchdog accusing them of  levying opaque charges, totalling £8bn a year.

 OFT chief executive, John Fingleton, accused the banks of   “charging more and more for things we can’t see” on the BBC’s Radio 4 Today programme this morning and that personal bank account holders were paying an average of £152 a year for the privilege.

He accused the banks of charging the most financially stretched individuals the most, with 1.4m customers paying over £500m in charges - or an average of £357 a year.

Today’s OFT report shows that of the £8bn revenue banks receive from current accounts,  £2.6bn derives from overdraft charges and £4.1bn from the difference between the interest banks earn on customers’ in-credit balances and the lower rate of  interest they pay to customers.

Mr Fingleton said that three out of four customers have no idea how much interest they are earning on their accounts and that the complexity of the charges made it difficult for customers to compare accounts.

“Few customers know how much they will be charged either before or after costs are incurred. To switch accounts, people need to know the average monthly balance on their account which only the bank can tell them. The complexity and lack of transparency mean people have little incentive to switch,” he said.

But the British Bankers’ Association hit back saying that free in-credit banking was almost unique to the UK and that those customers who don’t go overdrawn can get exceptionally good deals.

A case in point is the Lloyds TSB Classic and Classic Plus accounts which are currently paying 6 per cent on in-credit balances up to £2,500, despite base rate being at 5 per cent.

That said, many banks pay as little as 0.1 per cent on current accounts, particularly where the customer pays in small amounts or less than £500 a month.

Elsewhere, the legal fight between consumers and the banks over the fairness of overdraft charges looks set to be a drawn out battle lasting several years.

David Black, Defaqto banking consultant, comments: “I expect we will see a cap on overdraft charges and eventually the banks will recoup this revenue by ending free in-credit banking.”

In the meantime, you can compare account features in detail by using the Defaqto current account Compare Tool:

http://www.defaqto.com/consumer/current-accounts/compare-current-accounts.aspx

It may be doom and gloom on the property front, with 23,000 households reported to have fallen into negative equity in the last year, but anyone with money to deposit should cash in while the going’s good.

Banks and building societies are falling over each other in their eagerness to win a slice of your savings because of the ongoing credit crunch and the scarcity of funds in the wholesale markets.

Lloyds TSB has just increased the rate on its ‘Plus’ current accounts from 4 per cent to 6 per cent gross AER for existing customers, and those taking out a new account before 13 July 2008.

Plus accounts will pay up to 6 per cent gross AER on balances up to £2,500, providing you pay in at least £1,000 a month. The catch is that the interest will drop by 2 per cent at the end of 12 months (4 per cent gross AER currently).

The offer is available on Lloyds TSB’s  Classic account which has no fee and Lloyds TSB’s Gold, Platinum and Premier accounts, which provide extras such as AA breakdown cover, travel insurance and mobile phone insurance for a monthly fee.

Both existing and new customers have to ask for the 6 per cent rate to  be applied to their account by ringing 0845 3000 000 or visiting www.lloydstsb.com

Elsewhere, the ongoing legal wrangle between the OFT and a group of high street banks over what is a fair level for overdraft charges is already having a beneficial effect for customers.

Barclays Bank is to cut the amount it charges customers who exceed their authorised overdraft limits to £8 for each transaction. Customers will also be allowed a temporary authorised overdraft limit of £22, called ‘Personal Reserves’ for up to five days each month.

Barclays currently charges £30 for unauthorised but guaranteed payments (such as direct debits and standing orders), £35 per day for exceeding an agreed overdraft limit, as well as 27.5 per cent interest.

Barclays is to launch ‘Personal Reserves’ to all 11 million Barclays customers from August 18. Anyone exceeding the £22 free buffer zone will be charged £8 for each unauthorised payment, up to a maximum of £40 a day.