After much speculation over its economic future, the Republic of Ireland has accepted a ‘rescue package’ that will consist of loans from the European Union, the UK and the International Monetary Fund. So should savers with cash in Irish banks be concerned about its safety? Read our Q&A to find out how your money is protected.
Q. Is money held in Irish banks protected in case they collapse?
A. The Irish Deposit Guarantee scheme covers money deposited with the Republic of Ireland’s banks. Currently, this offers a different level of coverage than the UK’s Financial Services Compensation Scheme, which guarantees the first £50,000 of savings held per individual, per financial institution.
Depending on when you opened your Irish account, your money may be covered up to 100,000 Euros, or the Irish government may claim to cover the full amount held in your account. However, the ‘all funds’ coverage that may have been extended to you during the first wave of the global financial crisis is expected to end in June 2011 – and there is a chance it will be withdrawn before this, due to the requirement to implement a new European Directive.
Essentially, this means that if an Irish bank you were saving with failed, you would be reliant upon the willingness and ability of the Irish government to protect your funds.
It is important to consider whether you are comfortable with having your money guaranteed by a foreign government (whether it is Irish or otherwise), rather than by the UK FSCS.
You can read more about the FSCS and savings protection in the Which? Are my savings safe? advice guide.
In November 2008 when the Irish government first changed the coverage of its Deposit Guarantee scheme, Which? said: ‘There is no guarantee that the protection that has been offered by the governments in question will be forthcoming. It may be, for example, that the government cannot afford it … Consumers should not move their savings to any foreign country or bank on the strength of these guarantees.’
At that time we removed all banks which relied on the Irish deposit protection schemes from our Best Rate savings tables and have not included them in the magazine in the last two years. All the banks in our savings Best Rate tables are members of the UK FSCS, and we encourage consumers to spread their savings to ensure that they do not go above the limit for each bank.
Q. What about Post Office accounts? Aren’t they protected by the Irish scheme?
A. Up until the start of November 2010, Post Office savings were guaranteed under the Irish scheme – but a UK subsidiary of Bank of Ireland has now been set up to hold these funds.
This means Post Office savings are now guaranteed under the UK’s FSCS. You can read more about this in our Post Office savings get FSCS protection news story.
It is important to note that the FSCS currently offers a different level of savings protection than the Irish compensation scheme, so an additional rule applies to individuals with more than £50,000 in a Post Office account. In such cases, sums above and beyond the £50,000 savings limit will still be covered in Ireland until 30 June 2011. However the same drawbacks identified above apply: individuals in this situation are reliant upon the willingness and ability of the Irish government to pay out these amounts should the need arise.
You should also be aware that Bank of Ireland (UK) and the Post Office share a banking licence, and so consumers will only be covered up to the FSCS limit (currently £50,000) for all of their savings spread between those two brands.
Q. Where can I get more information on savings protection?
A. Read the Which? Are my savings safe? advice guide. It offers detailed information for UK-based savers, which should enable you to ensure your money has as much protection as possible.
It also contains a table that makes clear which financial institutions are regulated within the UK and thus enjoy FSCS protection.
If you are a Post Office saver, you can read more about how your savings are protected on its website.
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