The government has announced it will withdraw its 100% guarantee for Northern Rock savings deposits in May, after conducting a review of the state-owned bank’s stability and progress.
The treasury originally promised to back all Northern Rock deposits in 2007, in a bid to calm the panic which had led to a run on the bank.
The end of the 100% protection for savers marks a step towards independence for Northern Rock, the government says. Paul Myners, Financial Services Secretary to the Treasury, commented: ‘Over the last two years, we have worked to get the bank back to financial health… Today’s announcement shows how far we have come. Depositors can have confidence in Northern Rock.’
Northern Rock savings safety
Savers with existing variable rate accounts will remain protected by the government’s 100% guarantee until 24 May 2010. After this date, standard savings protection under the Financial Services Compensation Scheme (FSCS) will resume. You can read more about how the FSCS works in the Which? advice guide.
Savers with fixed-term bonds from Northern Rock will retain the treasury’s 100% savings protection until their accounts reach maturity.
However, anyone opening a new deposit account with Northern Rock will – as of today – have only FSCS protection.
Savings account protection
Which? Money editor James Daley said: ‘Today’s announcement should inspire anyone with Northern Rock savings to take a look at the rate their account is earning, and consider switching if they could get a better deal elsewhere.
‘The 100% government savings guarantee inspired some savers to keep their cash with the bank even though they weren’t getting a great return – but now this incentive is being withdrawn, savers should look elsewhere.
‘Those who have more than £50,000 with Northern Rock also need to act before May, making sure they’ve not got any more than this amount with any one institution. For those who wish to keep all their savings in one place, and want absolute certainty over the safety of their money, the only option is now National Savings & Investments.’
You can find out which financial institutions are connected and ensure your money is fully covered under the FSCS in our advice guide. If you’re keen to search for a new savings account, be sure to check out the latest Which? Best Rate savings deals.
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