Post Office savers no longer covered by compensation scheme

[POSTMAN]

Post Office savers no longer covered by compensation scheme
Savers must rely on the Irish government for compensation in the event of a banking collapse

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Post Office customers have applied to withdraw thousands of pounds from its popular savings accounts after being warned their funds were no longer guaranteed by Britain’s financial compensation scheme.

The move comes four months after the Irish government promised to cover 100 per cent of savers’ balances. Under European law, the blanket guarantee from Ireland meant the Irish banks were no longer eligible to be members of Britain’s scheme.

The Post Office, whose savings accounts are provided by Bank of Ireland, has written to customers to alert them to the change of rules. The Post Office provides financial services products to almost 2 million people in the UK.

Anglo-Irish, which was nationalised by the Irish government this month, also wrote to customers in recent weeks.

Britons poured money into accounts from the Post Office and Anglo-Irish, following the Irish government’s pledge to cover all savings in September.

At that time, Bank of Ireland and Anglo-Irish were members of the UK's Financial Services Compensation Scheme (FSCS) under the passport scheme. This ensures that if a non-UK bank defaults savers can apply for the first 20,000 euros from the foreign compensation scheme, and then apply for the remainder from the UK FSCS up to a total maximum of £50,000.

But some British savers have since become worried about the quality of the Irish government’s guarantee.

One customer wrote to the Sunday Times saying: “My wife placed her money in a Post Office 12 month Growth Bond because she was familiar and confident with the FSCS. What happens if the Irish government reneges on the scheme?”

A spokesman for the Post Office said customers had no reason to be concerned, adding the Bank of Ireland was a "strong and credible partner".

Michelle Slade, of Moneyfacts, the financial services provider, said: "People need to be realise that up until September 2010, they are 100 per cent covered by the Irish scheme, after that it's a 100,000 euros guarantee, so they're getting more protection than they would in the UK. There's been nothing to suggest that there's a problem with these banks."