British savings to be reclaimed

UK compensation scheme begins process to return frozen Icesave deposits

Thursday 6 November 2008

By Becca Talbot becca.talbot@consumerchoices.co.uk

Customers with money trapped in Icesave will receive emails this week on how to claim back their savings, as the Financial Services Compensation Scheme (FSCS) begins the compensation process for the failed Icelandic bank.

Earlier this week, the Financial Services Compensation Scheme (FSCS) sent Icesave customers the first of two emails detailing how to claim back their savings.

Refunds from the insolvent Icelandic bank will be triggered in batches over the next three to four weeks, with the cash arriving five days later. Icesave systems were not designed to pay all deposits at once, so some customers may find themselves waiting up to four weeks longer than others, explained the ICIS.

Icesave, owned by parent company Landsbanki, was declared bankrupt on 7 October, leaving more than 230,000 British customers unable to access a total of £4.5billion in cash.

The FSCS explains in its email to account holders: “The electronic payment process will be phased to manage the demands on the systems and in the interests of security. Over the next three to four weeks, depositors will be sent a further email inviting them to initiate the payment process.”

Following the second email from the FSCS, account holders will have to log on to the Icesave internet banking site using their existing user ID, and password to complete their compensation application. Customers can opt for a paper-based system rather than email. This could take considerably longer but would lessen the possibility of getting caught in a phishing scam (see box below).

The UK government has promised all UK customers will be repaid in full, and all accounts will be paid the interest they accrued up to the banks collpse.

The FSCS also clarified that the bank’s Individual Savings Accounts (ISAs) will retain their tax free status.

ISA customers will be sent a certificate in the post within two weeks of the electronic transfer process, allowing them to reinvest their money with another ISA provider. The money must be reinvested before 5 April 2009, in order to keep its tax-free status.

For any customers with savings in a long term (up to three years) fixed-rate account, who were not due to be repaid until maturity, there are two options:

1. They can request that all their money, plus interest accrued up until 7 October, is moved to a new bank account, using the online procedure for other savers.
2. They can leave their money in their Icesave account, and keep on accruing interest up until the normal maturity date, when the cash will be repaid.

Savers who wish to wait for their savings to mature will need to tick the relevant box on the electronic compensation application, explains the FSCS.

The Icesave website will be unavailable from now until the end of the week whilst it is developed to pay compensation.

Chris Eagle, commercial manager at CreditChoices.co.uk said: “This is reassuring news for Icesave customers who were worried about their savings. It is important now that they put their money into a savings account that not only offers a competitive interest rate but which is also regulated by the Financial Services Authority.”

If you are an Icesave customer but haven’t received an email from the FSCS by the end of Friday 7 November, you should contact them on 0845 7300 131

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