The FSCS speaks

News at last on Icesave compensation

Monday, 27 October 2008

Writes Hazel Cottrell hazel.cottrell@consumerchoices.co.uk

After three weeks of silence, the FSCS has announced a compensation plan which aims to reunite Icesave customers with their cash by the end of November.

On Friday evening, the Financial Services Compensation Scheme (FSCS) announced that it will soon begin compensating the 230,000 Icesave customers whose accounts have been frozen since the collapse of Icelandic bank Landsbanki.

The FSCS said that customers will be able to reclaim their savings through an “accelerated process,” due to start early next week. It said that it has been working on a process that will allow Icesave customers to electronically transfer their money back to their linked bank account, almost as if they were making a withdrawal in the normal way.

Customers of the failed bank will receive letters in the next ten days detailing how the process will work. The FSCS will then contact them again with instructions on how to complete a short electronic process to finish the transfer. It says that there will be no forms to fill in, but the process will be phased to manage the flow of payments through the system and for security reasons

Loretta Minghella, chief executive of the FSCS, said: “We have been working hard to establish a way of compensating retail depositors of Icesave without the need for a paper-based application process. We will be contacting retail depositors to tell them how the transfer process will work and when they can access the system. We expect to offer compensation to the vast majority of retail depositors in November.”

She added: “We recognise that Icesave’s customers have been anxious about their savings. We would like to thank them for their patience.”

The government has guaranteed 100% of all deposits held by retail depositors of Icesave and has reassured savers that they will not lose their tax status for their ISAs. Under the terms of the compensation scheme, UK savers will get their savings plus interest due up to 8 October, the day the bank was declared in default.

However, for those who had money in Icelandic accounts through offshore accounts, the outlook is still bleak. More than 2,000 customers with Landsbanki Guernsey have been told they will receive just 30% of their savings back from the failed bank, and those who stashed their savings with Kaupthing Isle of Man face a long wait to get their money back.

Chris Eagle, commercial manager at CreditChoices.co.uk says: “Many Icesave customers will be breathing a sigh of relief as the chance to reclaim their cash is now in sight. If you have to claim compensation, remember that your linked current account should only be a temporary home for your cash. Now is the time to be looking for a new savings account, bearing in mind both the rate of interest and whether the institution holding your cash is regulated by the FSA and covered by the FSCS.”

Compare savings accounts>>>