Northern Rock savers don’t panic

The shock news that Northern Rock has been assisted by the Bank of England, acting in its capacity of lender of last resort, may cause concern for Northern Rock savings customers.

While it may be difficult not to worry if your life savings are invested with Northern Rock, Rachel Thrussell, Head of Savings at Moneyfacts.co.uk – the money search engine explains why savers should not panic.

“Savers should rest assured that Northern Rock is fully regulated by the FSA, with funds also covered by the FSCS (Financial Services Compensation Scheme). This gives savers the peace of mind that the depositor protection scheme will provide £31,700 of cover should a company cease trading. This limit is per individual saver and is calculated as 100% of the first £2,000 plus 90% of the next £33,000.

“But savers should be aware in the case of other companies which are part of a group, that this cover is based at group level rather than for the individual companies. So for savers with investments spread across the group, they will still only receive a maximum of £31,700.

“For many years it has been taken for granted that the UK banking industry is almost invincible, but with recent uncertainty, savers may be wise to take account of where their savings portfolio is invested. Its very unlikely that Northern Rock will be allowed to go under; it is likely that the BoE will continue to provide support or the company will prove to be a ripe catch for a competitor takeover.

“Finally don’t keep all of your eggs in one basket. Spread your risk and make the most of the diverse and competitive range of products available.”