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Tuesday 14th of October 2008
November 8, 2007

More protection for savers


by Kay Murchie
”More

In a bid to regain consumer confidence in the bank sector, the Government has announced that savers will be offered more protection in the event of another Northern Rock disaster.

In the Queen’s speech earlier this week, it announced plans to introduce legislation to improve the current structure for dealing with banks in trouble, including protecting savers’ money.

A discussions paper was released last month on this subject and the Government is looking at whether the level of savers’ money that is protected if a bank collapses should be increased.

Previously, Alistair Darling, the Chancellor, said savings should be guaranteed up to £100,000 but new laws are needed to raise the threshold that high.

Under the guarantee, customers’ first £35,000 will be fully protected. Until now only the first £2,000 of savings and 90% of the next £33,000 have had such protection.

The Government has announced that it will publish a consultation document based on responses to its proposals in early 2008. However, the Government added that before it carried out any specific measures, it wanted to be reasonably assured that the benefits of the changes would exceed the costs.

However, the Association of British Insurers has warned that the new measures could distort the savings market, drawing people towards cash savings and away from investment products.

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