27,000 savers at merged building societies given extra protection

Thursday, 04 June 2009 02:13

Savers with cash in different building societies that have merged will continue to receive extra protection.

Today, the Financial Services Authority (FSA) has ruled the Financial Services Compensation Scheme (FSCS) protection of £50,000 per institution will not be lost for savers.

The added level of protection will run until December 2010.

There were fears people with savings in two institutions would see their deposits breach the £50,000 level after a merger and so put them at risk.

Instead they will have two slices of £50,000 protection.

The FSA estimates some 27,000 savers will be affected.

Nationwide recently merged with both Cheshire and Derbyshire building societies, and took over Dunfermline Building Society.

Yorkshire Building Society has merged with Barnsley Building Society, as has Skipton Building Society and Scarborough Building Society.

Britannia Building Society and the Co-operative Bank are also set to link-up.

The double protection was first brought in last year under fears savers would rip funds out of building societies if they were not protected - and were due to expire in September.

Jon Pain, FSA's retail markets managing director, said: "The interim rules were introduced on a temporary basis to reassure customers involved in particular mergers or transfers.

"They helped existing savers who wished to keep below the deposit protection limit and also served to reduce withdrawals by savers from successor firms driven purely by compensation considerations."

Brian Morris, head of savings policy at the Building Societies Association (BSA), said: "Today's announcement is a welcome, sensible move and means members of societies that have merged, or whose deposits have been transferred to another society, will continue to enjoy the same levels of protection as if the merger or transfer had not occurred."

He added: "It would not be appropriate if moves, such as mergers, designed to reassure and protect members led to a reduction in the levels of FSCS protection for members who have savings in both entities."

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