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Sunday 08th of March 2009
December 2, 2008

Building societies become safe haven for savers


by Kay Murchie
”Building

The Financial Services Authority (FSA) has introduced a rule which allows merged building societies to keep their separate compensation limit.

In the past, anyone with money in two building societies that merge could find only the first £50,000 of their savings protected.

It is hoped that the new level of protection will mean that people with savings that exceed £50,000 in a newly-merged building society will keep their money in the account, rather than transferring their money elsewhere so as not to exceed the limit.

The new system will be operational until 30 September 2009 and has been established due to an increase of building society mergers recently.

Last month, North Yorkshire-based building societies, Skipton and Scarborough merged, while in October, Barnsley Building Society was forced to merge with the Yorkshire Building Society after it revealed its high exposure to collapsed Iceland banks.

Furthermore, the UK’s largest building society, the Nationwide, rescued two small societies, the Cheshire and the Derbyshire, in the summer.

In related news, a poll has found that savers trust Nationwide Building Society as being the safest haven for their money, with 14% respondents saying they would choose to save £50,000 with Nationwide.

The survey, conducted by moneysupermarket.com, also found that Abbey was in second place with 13% of people saying they would save with them.

However, while this is good news for building societies, the recent financial turmoil has meant that 64% of people are finding it more difficult to save than this time last year, with the majority blaming soaring living costs.

However, those who are saving have moved their money to new savings accounts to ensure their money is safe, according to Kevin Mountford, head of banking at moneysupermarket.com.

Nearly half of people (45%) say the security of the provider should be the most important factor when choosing a savings account, while 47% say the interest rate is the most important factor.

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Story link: Building societies become safe haven for savers


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