Abbey National has confirmed it will take over the ailing Bradford & Bingley’s (B&B) savings business, in a move that could have repercussions for some customers.
Following a monumental collapse in share price from £5 in 2006 to just 20p last Friday, the government has stepped in to nationalise B&B, with the mortgage and personal loans businesses now falling under public ownership.
However, the £20 billion held in savings by B&B’s 2.5 million customers will now fall under the control of Abbey, which is owned by Spanish banking giant Santander.
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“Business as usual” for savers
The Financial Service Compensation Scheme (FSCS), which guarantees the first £35,000 held in any UK savings institution, has stressed that the changes at B&B will not impact on savers.
According to FSCS Chief Executive Loretta Minghella, the scheme is contributing some £14 billion to enable retail deposits held in B&B and covered by the FSCS to be transferred to their new owner Abbey.
“This initiative means that some 2.5 million people can rest assured that their money is safe and they will not lose it because of the problems at Bradford & Bingley,” says Minghella.
“They can access their accounts in the normal way and it is business as usual for them.”
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Joint Abbey, B&B savers could lose out
However, a spokesperson for Abbey confirmed that, following the acquisition, anyone holding savings with both Abbey and B&B would be covered by just the one guarantee as they fall under the same institution.
So customers holding more than £35,000 with both these institutions may want to consider switching some of their funds to ensure they are protected during these volatile times.
Alliance & Leicester was also incorporated into Santander two weeks ago, but crucially for savers, these funds are separately guaranteed under the FSCS, according to the Abbey spokesperson. That means anyone with funds in B&B and A&L will be protected up to £70,000.
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Possibility of a fall in rates
There is also the possibility that, with funds all on the same books, Abbey will decide to switch B&B saving rates to those offered by Abbey.
This would be bad news for B&B savers, as the bank’s rates tend to be higher than those offered at Abbey. At present, B&B’s best easy access and fixed rate savings accounts pay 6.51% and 7% respectively, compared to 6.30% and 6% at Abbey.
However, the Abbey spokesperson says it is far too early to say whether this will happen.
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Spread your bets
The best way to earn maximum interest while still keeping your savings secure is to spread them around in £35,000 packets at the various top paying institutions (making sure that each is separately guaranteed).
However, if you really want to keep your money in one place, you should go to Northern Rock or National Savings & Investments (NS&I). But while they offer the security of being government backed, they also offer less competitive rates – NS&I just cut the interest on some of its fixed saving products by as much as 0.75%.
Alternately, you may want to consider putting your money with the Post office. Because its saving scheme is run by the Bank of Ireland, it falls under the Irish compensation scheme, which covers all savings up to €100,000 (£79,600).
Unfortunately, the rates on offer are pretty average, at 5.75% for both easy access and five year fixed rate.
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