Savings in Post office accounts will be guaranteed under a UK system.
The FSA will begin protecting Post Office savings this month.
Post office savers no longer have to rely on the Irish government to protect their deposits from today.
The first £50,000 of cash deposited into Post Office accounts will now be covered by the UK’s Financial Services Compensation Scheme (FSCS) instead of the Irish Deposit Guarantee Scheme.
Previously the Bank of Ireland (Bol) had been in charge of the savings accounts and was operating under an Irish licence. Bol’s creation of a UK subsidiary, Bank of Ireland (UK) PLC, means that the Financial Services Authority will authorise and regulate the accounts from now on. The protection covers the first £50,000 of savings per customer, or first £100,000 if the account is held in a joint name.
However, under the Irish Deposit Guarantee Scheme the first £89,000 of savings were protected. Post Office savers with over £50,000 of savings will still receive an additional guarantee under the Irish scheme until the end of the year.
The level of FSCS coverage will rise from £50,000 to 100,000 euros from 1st January 2011, in line with other European schemes.
Money saving expert Martin Lewis said: “This is great news. For the last few years, while Punjabi National and the First Bank of Nigeria both have full UK protection, Post Office savers needed to rely on another country’s scheme. This was especially damaging because of the confusion between Post Office-branded savings and products it sells from NS&I, the 100% safe government-owned institution”.
He added: “Having met the Post Office and strongly lobbied that it undermined the trust consumers should have in their savings, I was delighted when I heard the change would happen. Fingers crossed it pulls out some cracking rates in the future as, with this change, there are no negatives to putting cash there”.