Post Office savers to get UK protection

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The post Office is finally becoming more British.

The 500,000 savers with Post Office savings accounts, which are in fact provided by Bank of Ireland, are receiving letters telling them that the bank is completing a restructuring that will see it operate through a UK-regulated subsidiary.

That means savers will enjoy the same depositor protection as British bank customers.

Until now, as Financial Mail has reported for more than a year, Post Office savers have been covered by the Irish depositor safety net.

This gave apparently greater protection than the UK's £50,000 limit because the Irish scheme had no nominal cap.

But in practice the value of the protection was questionable because of the parlous state of Ireland's economy. Since the credit crisis, the country has been viewed as one of the weakest members of the eurozone.

The High Court is ratifying Bank of Ireland's new structure and the bank hopes that from November it will be trading as a UK subsidiary.

At that time, existing and new accounts will fall under the umbrella of the Financial Services Compensation Scheme, which offers £50,000 protection per account holder per licensed institution.

The change will please Post Office savers and enhance the attractiveness of its more competitive rates.

The alignment will also please National Savings & Investments, which sells many accounts through post office branches.

It had worried that savers would avoid all financial deals from the Post Office because of the Irish link, including its own deals underwritten by the UK Treasury.