Government backed savings providers deter customers
Michelle Slade, analyst at Moneyfacts.co.uk, comments:
“Northern Rock has once again pulled more of its savings products, while National Savings and Investments (NS&I) have cut rates in a move to deter savers who are looking to take advantage of the 100% government guarantee.
“Both Northern Rock and NS&I have agreed limits on the total amount of depositors’ money that they can accept and both are dangerously close to this level as savers look to find what they perceive as the most secure home for their money.
“It appears that, rather than searching out the best rate, savers are more worried about making sure their money is protected.
“Consumers are much more aware of the compensation scheme than they ever before, but are still unsure about how it actually works. However, it seems the increase to £50K has done little to stop savers worrying, even though the majority have less than this saved.
“The debacle over Icesave will do little to help consumer confidence and it is likely that many more will look to move their money into either Northern Rock, NS&I or one of the Irish banks with the 100% guarantee.
“Icesave had been offering best buy rates to UK customers, but these have now been withdrawn.
“With Icesave’s parent company, Landsbanki in receivership, savers may have to claim under the Icelandic compensation scheme first and then have it topped up under the Financial Services Compensation Scheme (FSCS).
“This will be a big test for the FSCS and if matters are dealt with quickly and efficiently it may help improve consumer confidence in the scheme and ultimately regain some confidence in the financial industry as a whole. “
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