The 100% safety guarantee protecting Northern Rock savings is under review. But what does this mean for your money?
It's looking likely that at some point in the next couple of weeks the Treasury will formally announce plans to remove the 100% safety guarantee that's been protecting Northern Rock savings.
But, and I can't stress this enough, there is absolutely no need to panic!
For starters, if the Treasury do decide that this is the right course of action to take, it will be because they're confident that Northern Rock is financially stable enough to stand on its own two feet. And, more than likely, will be looking to set in motion plans to return the now nationalised bank back into private ownership.
What's more, and perhaps more importantly if you hold savings with the bank, the FSCS's standard £50,000 safety guarantee will still apply. This means that if you hold under £50,000 in savings with Northern Rock, every penny will still be protected should anything untoward happen.
If you hold over £50,000 with the bank then, should the Treasury decide to reduce the protection limit, you may want to consider moving anything in excess of this amount to a different bank or building society. This would of course just be as a precautionary measure so as to ensure that all of your savings remain fully covered.
However, there is no need to act rashly; should the Treasury decide on this course of action, they have confirmed that all deposits will retain the 100% guarantee for an additional 3 months after the announcement is made. Furthermore, any savings accounts that are part way through a fixed term will continue to benefit from 100% protection until they reach maturity.
This will give anyone looking to move their money plenty of time to research their options and find an account that best suits their circumstances without forfeiting their return. Particularly, this applies to those who would be penalised for withdrawing savings from a fixed rate account mid-term and those who hold a cash ISA with the nationalised bank.
Should you decide you want to move your ISA savings elsewhere it's really important that you do this via the official transfer channel rather than simply withdrawing your cash; this will ensure that your money maintains its tax free status.
Of course, while this news is likely to come as an inconvenience to those who chose to forgo rate chasing and priorised safety by keeping their savings with Northern Rock, for everyone else this could well represent a positive step.
Should the guarantee be lifted, Northern Rock will be in exactly the same position as every other bank or building society offering accounts in the UK. This means they'll no longer be able to rely on their 'safe' reputation as a draw and will need to up their game if they want to compete for your business. So, theoretically at least, this should mean we'll see them offering more attractive interest rates. For us savers, this can only be a good thing.
