Reckon your Post Office pounds are (almost) as safe as the Bank of England? Think again. If you’re one of 500,000 savers at the Post Office, which offers Bank of Ireland (BoI) accounts, you’ll have just been warned that the rules have changed. These accounts are no longer covered by the UK’s Financial Services Compensation Scheme (FSCS) because the Irish Deposit Protection Scheme, introduced last year, has “automatically” replaced it. So were the BoI to fail, you’d be totally dependent on Irish government compensation.
On the surface, that’s no problem – Ireland’s scheme covers 100% of its banks’ savings deposits until 2010. But as with most financial schemes these days, there’s a catch. Irish bank balance-sheets look pretty dodgy. The Irish government has already been forced to nationalise Anglo Irish Bank, raising fears over other lenders. The Irish Stock Exchange financial share index has plunged 95% within the last two years. Worse, Ireland itself is looking sickly. The cost of insuring against the country defaulting on its sovereign debt has risen eight times in the last five months after the government underwrote Irish banks’ liabilities.
So “is it time to bring your money home”? asks the Daily Mail’s Richard Dyson. Realistically, it’s unlikely Ireland would be unable to meet its obligations should the worst befall BoI. But how many times over the last few months have we seen ‘unlikely’ events occur? If you don’t want the extra hassle of having to claim under another country’s compensation scheme, should it become necessary, then repatriate your cash now.
But bear in mind there’s no 100% guarantee that our own national finances would be sound enough to foot all the costs of a big British bank defaulting. And remember – the UK scheme only guarantees deposits of up to £50,000, so it pays to spread your savings around.