Icesave shut down
Troubled savings bank Icesave has been declared in default but the authorities say its 300,000 customers will get their money back.
The Financial Services Compensation Scheme (FSCS) has now stepped in to ensure that those hit by Icesave’s closure receive 100% of their money back as soon as possible. Icesave froze access to its saving and ISA accounts earlier this week after its Icelandic owner Landsbanki was taken into public ownership in its home country.
Following concerns from savers unable to withdraw their money, the British government promised to protect 100% of funds held in the bank. It has also guaranteed Kaupthing Edge, and Heritable Bank’s saving customers.
The FSCS says is working closely with the Treasury and the Financial Services Authority to take the “necessary steps” to pay people back their money.
Loretta Minghella, chief executive of the FSCS, says: “We know that many savers with Icesave are anxious about their savings. Following the chancellor's announcement today people can be confident they will be repaid in full.
"We are working closely with all concerned on the practical arrangements to get people their money back as quickly as possible.”
The advice to savers is not to worry. Although it is not yet clear when money will be repaid to Icesave customers, the FSCS says it will make a further announcement on Friday.
Heritable Banks, which was also owned by Landsbanki, has now been shut down by the government as its was deemed no longer financially able to gaurantee savers' money.
The majority of its saving customers have now been transferred to ING Direct. The rest of Heritable's business - including its mortgage lending business - has been put into administration.
The 100-odd savers who have not been transfered to ING will get this money back (up to £50,000) from the FSCS. Any depositors with money over that amount will be paid the remainder by the Treasury.
Meanwhile, Kaupthing Edge has also had the majority of its accounts transfered to ING - bar around 3,000 non-internet saving accounts.
Savers with non-online accounts will be contacted within the next week by the FSCS so they can claim compensation.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).