Are Post Office accounts still safe?

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Question:
I was told the 100% guarantee on Post Office accounts run from Ireland will cease from 22 September. Is this right and what happens next?

I phoned the Post Office about their growth bond and was told that the 100% guarantee on accounts under the Irish compensation scheme will cease from 22 September 2010.

Is this right and what happens next? B.S., Bromley, Kent


Answer:

Simon Moon from This is Money replies: The 100% guarantee to account holders with all Irish banks and their subsidiaries was a panic measure to shore up the republic's financial system which appeared to be on the brink of collapse in September 2008.

The Post Office benefited from the move because its accounts are run by the Bank of Ireland.

However, the guarantee made the Irish government liable for more than £300bn in the event of a crash – a level that was seen as unsustainable and it was announced at the outset that the safeguard would end in September 2010.

The Post Office says the 100% guarantee will revert to the previous Irish compensation limit of €100,000 which is equivalent to about £90,000. This leaves it still much higher than the UK financial services compensation scheme limit of £50,000.

The only other institutions to offer a 100% savings guarantee in the UK include the nationalised Northern Rock and National Savings & Investments.