Banks should warn exposed savers

It's not often that the majority of MPs say banks should be forced to raise interest rates
But in this case they mean raising interest in a protection scheme for all savers who use UK financial institutions.
Such is the widespread ignorance of the scheme, that banks and building societies are being urged to tell investors when they exceed its guaranteed limits.
All this is according to the Financial Services Compensation Scheme (FSCS), the UK's savings safety net.
This last-resort compensation fund protects a maximum £85,000 for single account savers and £170,000 for joint accounts if a bank goes bust.
This is funded by an industry levy.
As many as 81 per cent of MPs surveyed in an FSCS poll say financial institutions should make it clear to savers when their deposits exceed the £85,000 compensation limit that anything above this amount is not protected.
More than three-quarters (76 per cent) of customers polled agree, said the FSCS.
The body itself wants to see banks and building societies doing more to raise awareness about compensation limits in their everyday dealings with customers, including advertising.
The FSCS previously acknowledged that its own promotional efforts have not sufficiently raised the public grasp of the scheme.
Its last study in December found that just over one in 10 customers (12 per cent) know precisely how much of their money would be safeguarded if their bank went under.
Such lack of awareness has continued, despite new awareness rules coming into force last August.
They ordered that that banks, building societies and credit unions must prominently display stickers or posters publicising compensation rates.
The savings safety net's latest study also discovered that more than three in four MPs think that banks and building societies should include details about the FSCS in their advertising.
Four-fifths say that raising awareness of the body would enhance consumer confidence and financial stability.
Researchers surveyed more than 150 MPs and 1,000 consumers.
The FSCS has assisted more than 4.5 million people and paid out more than £26 billion in the past 12 years.
The scheme guarantees savings held with UK banks and subsidiaries of foreign banks which operate in the UK.
It does not, however, cover deposits stored with UK branches of European banks, which are covered by the relevant compensation scheme in the country where the bank has its head office.
The recent Cyprus economic collapse highlighted the subject of savings protection.
It was announced last week that about 15,000 savers in the UK branch of stricken Cypriot bank Laiki would have their savings switched to Bank of Cyprus UK.
This bank works as a fully-fledged independent bank in this country.
This means that its deposits are covered by the FSCS.
Mark Neale, FSCS chief executive, said it is too late for customers to learn about FSCS when a run on a bank begins.
He thinks banking companies can and should do more.
Mr Neale said that savings compensation awareness is higher in the United States as financial institutions customarily include such details in their advertising.

ISA savers 'not using allowance'

18/03/13

By Paulette Flahavin

As the financial year draws to a close, only one in six savers with tax-free Individual Savings Accounts (ISAs), have been able to put away the maximum allowed amount in their pot, a new Halifax survey of its customers reveals.

The UK's largest provider of savings accounts said that only 15 per cent of clients who opened cash ISAs this financial year had managed to put away the maximum £5,640 for 2012/13.

The high cost of living and dormant wages are seen as the culprits behind people's failure to save as much as they would like.

Young people, in particularly, are struggling to save, as evidenced by the average balance of savers between the ages of 25 and 34 standing at £2,712, which is not even half of the maximum cash ISA currently allowed.

The Halifax study carried out at the end of January discovered that savers between the ages of 35 and 44 have a typical balance of £4,389. As savers age, their savings balance grows. The average balance of those 75 and older is £15,035.

When comparing savings levels by regions across England and Wales, people in East Anglia had the highest average savings balance of £9,512.

There is a 16 per cent difference between the highest regional savings level and the lowest, which was found in the North East, where the average balance is £8,220.

While the average savings balance for women was lower than that of men, women save a higher percentage of their earnings than men. The average female savings balance is £8,816, while for male savers it is £8,973. That said, women's cash ISAs equalled 43 per cent of their typical gross earnings, while men's ISAs equalled 26 per cent.

The Bank of England base rate has been at a record low of 0.5 per cent for four years, making the savings environment unrewarding.

Halifax reported that in the 2011/12 tax year, more than a third, or 36 per cent of their clients reached their maximum cash ISA allowance.

"With disposable income continuing to be squeezed, savers are finding it increasingly hard to put money away," Richard Fearon, head of Halifax Savings, said, adding:

"We also believe that the fact that the allowance increases each year means people often aren't aware of the full amount they can invest.

"However, putting what you can in a tax free account should be the first place you save your money."

Also this week the Building Societies Association urged the Government to help savers in next week's Budget by scrapping the tax on interest of any non-ISA savings while the bank rate stayed at record low levels.

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.