Savings account Guides

Icesave savings: Q&A

Updated: 27th October 2008 by Becca Talbot
becca.talbot@consumerchoices.co.uk

More than 350,000 UK customers have around £4bn invested in the Icelandic bank Icesave. With the global credit crunch taking it’s toll on the Icelandic banking system, the financial authorities in the UK are now preparing for the bank’s parent in Iceland, Landsbanki, to be declared insolvent.

British customers who have savings with Icesave are being warned they will have to claim compensation from the Icelandic government and the FSCS to get their money back.

Our financial editor, Becca Talbot, has been inundated with questions from worried Icesave customers. Here she answers a few of your queries:

Why can't I withdraw my money?

Question: Becca, after reading your news on Monday, I tried logging on to my Icesave account to transfer my money, but it says they are not allowing any withdrawals or deposits, and their phone number is constantly engaged. Have they gone bust despite the government’s assurances? I was hoping to move my money before this happened.

Natasha Swift, Surbiton

Answer: Landsbanki, Icesave’s parent bank, was taken under the control of the Icelandic regulator (IFSA) late on Monday night. The bank then issued a statement saying it had not been liquidated, only put into receivership. We will see what happens to the bank over the next couple of days; however the UK FSCS has said it will handle applications for compensation from UK savers, rather than them having to deal directly with the Icelandic authorities.

What about ISAs?

Question: Hi Becca, I have a cash ISA with Icesave, will this be safe? If so, is there any limit on amount of money protected? Do ISAs come under the same bracket as standard savings accounts?

Mickey Kew, Belfast

Answer: Mickey, the good news is that a cash ISA is treated in the same way as any other taxable savings account - the overall limit on money protected is £50,000, per person, per institution. If you have over £50,000 in your ISA, it is unsure of what will happen at the moment – Keep reading our news updates to find out more. The FSA has said arrangements are being put in place to ensure that all ISA customers of Icesave will continue to benefit from the tax-free status of their accounts.

Why is the compensation split?

Question: Can anyone at CreditChoices.co.uk explain the why there is such a panic about claiming back the compensation? I really don’t understand what’s going on!

Confused, via email

Answer: This is a really good question. Basically, Icesave offers a different kind of protection to customers to other foreign savings accounts, such as Kaupthing and ICICI (www.icicibank.co.uk). If you are claiming compensation from the bank you will get first 20,887 euros (about £16,300) covered by the Icelandic protection fund; and the remainder will be covered by the FSCS, rather than the whole £50,000 being covered by the FSCS.

Will I get back more than my savings?

Question: Becca I really don’t know what to do. I’m a self-employed builder and have about £12k in my Icesave ISA which I was planning to use to pay my income tax at the end of the month. If I can’t get hold of the money, I won’t have the cash to pay my income tax when it is due. Will the government, Icelandic or British, pay my fines!? What do you recommend?

Russell Lee, Bracknell

Answer: I understand your frustration completely Russell, though I think it is unlikely that either government will pay the fines or compensate you for your losses, as the FSCS only covers money in your savings account. And as Landsbanki, the parent company of Icesave, is yet be declared insolvent, so it is still too early to say when the compensation clause will be triggered.

It could be months before you will get you hands on your money, so it is worth contacting your tax office and explaining the situation, they may be more understanding than you think, and I’m sure you’re not the only person in this position.

What about other Icelandic bank accounts?

Question: I have a savings account with Kaupthing. Are my savings safe?

Cassida-Mai Lynch, Kettering

Answer: Do not worry, for anyone with a Kaupthing (www.kaupthingedge.co.uk) account, your money is safe and their website is open for business as usual at the moment. Kaupthing Edge is a UK bank and regulated by the Financial Services Authority (FSA). This means that if the bank does collapse, the first £50,000 will be covered by the UK compensation scheme, rather than the split Icelandic/UK arrangement with Icesave.

UPDATE: Kaupthing Edge savings accounts will be transferred to ING. Read here for more information.

How long before we get our money?

Question: Dear Becca, after seeing Icesave at the top of your best buy table, I opened an account with them and deposited £3,000. I’m always very careful with my money, and as you suggested in your article the other day, I spread my money between banks; so I also have accounts with HSBC and ICICI. I’m just a bit worried as to how long it’ll be before I get my money back?

Stephen Daneby, Ripon

Answer: Hello Stephen, very wise of you to spread your money with different institutions – this is the only sure-fire way of guaranteeing you get 100% of your savings back in the unlikely event that a bank does go bust. At the moment it is still too early say what the process will be for claiming funds invested with Icesave. The first 20,887 euros (about £16,300) of all claims will be covered by the Icelandic protection fund. However, with a reported 350,000 UK savers having deposits and accounts with Icesave, it could be some while before claims are processed and your money refunded.

It is in the interests of the UK Government to liaise with the IFSA to provide clarity on the claims procedure for all British customers, so news should be available within the next few days, and I will endeavour to keep you as updated as possible.

How do I claim?

Question: Please can you tell me how to claim to Icesave or whoever will be dealing with matters to be able to start the claim process. Thank you

from Alan Huitson, via email

Answer: Hi Alan, Thanks for your question. The good news is that the FSA will now be dealing with total of each claim, and not the Icelandic government for the first 20,000 euros. The bad news is it is still too early to say how customers will have to go about the claims process, but hopefully we’ll have more information by tomorrow (Friday 10th), as the FSA and the government work towards a plan of action. I will try to keep you updated, as and when I find out more. Until then, my advice to Icesave customers is to try and gather all the paperwork together for your account(s), and if you can get onto the website, print off a copy of your online statements.

What about the interest I've earned?

Question: Becca, my wife and I have a joint savings account with Icesave. As the amount is below the £50K compensation threshold, I am happy that we will get all of our money back eventually. However, I have seen no reference anywhere as to whether savers will get the interest due on their accounts. Our money is in a one-year bond taken out in June this year so we should get four months’ interest.

Regards, Malcolm Patterson, via email

Answer: Hello Malcolm, your question is one I have been asked by quite a few Icesave customers. Firstly, Alistair Darling has now promised that savers will get all of the money in their accounts back, so this is good news for anyone that has more than £50,000 deposited. The interest on your fixed-rate bond is a slightly trickier issue, as nothing is definite yet. It really all depends on how you chose to have your interest paid when you first set up the account.

I think the most likely outcome is that the FSA will be able to pay any interest that has already been added to your account balance. For those that chose to have it paid monthly, they should have the interest for September added to their balance, so this should be refunded. However, for those customers that have annual interest paid into their account, I think it is unlikely that they will be able to claim this back.

But I must state, this is only my understanding on things as they have happened so far. Hopefully by tomorrow we will have more clarity on the situation, both with how to claim back your savings, and what exactly each customer will be able to claim back.

Will the money be in euros?

Question: Hi Becca, if the Icelandic protection fund covers the first 20,000 euros will the compensation money be paid in euros or in £.

Regards, Peter Grundy, via email

Answer: Hello Peter, as far as I know, the decision by the FSA is to pay back the full amount deposited by each customer. And as the FSA is now dealing with the claims, rather than the Icelandic government, I believe money will be paid back in pounds sterling.

Are savings bonds covered?

Question: Very helpful article. I have one further query: Regarding compensation, is a one year fixed rate Icesave savings bond treated in the same way as a savings account, or do I have to wait for a year for the bond to mature before making any claim?

Arun Mukerjee, via email

Answer: I don’t think customers will have a choice as to when they can claim back their savings. But if they do, my advice would be to claim back your money as soon as the FSA makes it possible. Hopefully by tomorrow I will know more about how and when to claim back your savings.

What about Landsbanki banks in the Channel Islands?

Question: Hi Becca. I am a UK citizen and have deposited money in the Icelandic bank of Landsbanki Guernsey. I am concerned about WHAT, IF ANYTHING, I have to do to recover all my money, in accordance with the Chancellor’s and Prime Minister’s statements yesterday that ALL UK CITIZENS WILL BE ABLE TO RECOVER ALL THEIR DEPOSITS FROM THE FAILURE OF THE ICELANDIC BANK.

As I am a UK citizen, have lived all my life in the UK and paid UK tax on the deposit interest that Landsbanki have paid to me; please confirm that I am covered by the statements made by the Chancellor and Prime Minister on TV, and advise me what I should do. Thanks for your article and I look forward to your reply.

Mrs Ruth Hodgson, via email

Answer: Dear Ruth, your issue is a complex one, and I’m afraid I don’t really have a definite answer for you. Chancellor Darling’s did indeed state that he will work together with the FSA to make sure all UK customers of Landsbanki get their savings back, but as the FSCS has it’s only exclusions, it is difficult to say. The FSCS stipulates clearly that it doesn’t cover banks in the Channel Islands or the Isle of Man, I think your best bet is to approach the Guernsey government, and see what help they can offer you. The Administor of Landsbanki Guernsey Limited has said: “At this stage we cannot say how much or when, but the Administrator will be working towards an orderly repayment to depositors seeking repayment, at the earliest opportunity.”

Read this FAQ on the Landsbanki Guernsey website for more information.

Should I cash in my ISA?

Question: Becca Talbot’s e mail RE Icesave’s customers to claim compensation was very informative. I have an ISA with Icesave. Should I cash it in via a claim or sit it out. Many thanks for any more info.

Michael Manning, news story comment

Answer: Thanks Michael, glad you found the email useful. My advice for all Icesave ISA customers is to claim back your money as soon as the FSA make it possible. As yet, I’m still unsure of when this will be, but hopefully by tomorrow (Friday 10th) I will be able to update you on how and when to go about the claims process.

Where has our Icesave money gone?

Question: Hi Becca, last weekend I closed an Icesave ISA and the site said that the money would leave the account on 6th October. Sure enough, the next day the account had disappeared. The money has not yet arrived in our linked account and I suspect that it is unlikely to do so. Where will the money be and how can we prove its existence to the compensation authority?

Donald and Carol Waine, via email

Answer: Hello Donald and Carol, wise move in closing your account. As you only made the transfer on Monday, it’s likely that the transaction hasn’t yet been completed, which is probably why it isn’t showing in your linked account. From my own personal Icesave experience, it can take up to 7 days before the money is transferred.

My advice to you would be to continue checking the balance of your linked account, and if the money hasn’t appeared within a weeks time (16th October), then get in touch with the bank where the money is supposed to be going, and see if they have any knowledge of the transfer. As to proving the existence of the money, if in the event that you do need to make a claim, it is a good idea to gather together any paper work you have for your ISA, as well as any email correspondence sent from Landsbanki or Icesave.

ICESAVE LATEST: News at last on Icesave compensation

If you have any other questions on Icesave accounts and the liquidation of Landbanski that you’d like answering, then send Becca an email: becca.talbot@ConsumerChoices.co.uk

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