First Payments Made To Icesave Customers

Five weeks and four minutes after they first discovered their savings might be at risk, the first UK Icesave customers have got their money back.

The Financial Services Compensation Scheme (FSCS) last week allowed 10,000 savers to transfer their money out of Icesave and into a nominated account via online banking -- using a BACS transfer process that takes, on average, less than four minutes.

The randomly-chosen 10,000 savers were sent an email explaining how to start the online claims process. By the end of Friday, the FSCS had made payments to the value of some £0.25 billion to these savers.

There were more than 200,000 Icesave customers in the UK when the Icelandic bank went bust. All have been told they will receive full compensation - even if their savings exceeded the £50,000 FSCS compensation limit.

It is a very different story for savers in the Isle of Man and the Channel Islands, who may not receive anything for years - and even then only up to £50,000. (Read The Perils Of Saving Offshore and Bad News For Isle Of Man Customers for more about this topic.)

The taxpayer

If you don't have savings with Icesave, or took care to save less than £50,000 with any single financial institution because of the compensation limit, you may disapprove of the bail-out of UK Icesave savers by the British Government.

However, there is some good news for British taxpayers. The Icelandic Government has at last agreed to abide by EU regulations and accept liability on deposits of up to _20,000 (£16,400). Initially, it said this deposit guarantee would cover only domestic savers in Iceland.

This means the Icelandic Government should pay back the FSCS for the first £16,400 of any UK Icesave customers' claim.

When should you expect an email?

Hopefully, very soon. The FSCS claims it "remains on track to offer compensation to the vast majority of Icesave customers in November".

Emails explaining how to start the online claims process are being sent out in set phases for security and "operational reasons". There is no set pattern in the ordering of the emails, so customers are asked to be patient.

Anyone who opts not to use the online payout system will still be able to claim compensation using a paper-based application, although the FSCS warns that this process will take longer. Application forms will start going out next week to about 16.000 Icesave customers who did not have nominated accounts linked to their Icesave account.

Savers who took out an ISA will also be able to transfer their money into their nominated account but, as long as they re-invest the money in an ISA before 5^th April 2009, they will not lose any tax-free benefits. They will be sent a special certificate over the coming weeks which they can present to their new ISA provider.

In the meantime, the message is: sit tight and don't worry. Your money is safe, and should be winging its way back to you shortly.

More: The Perils Of Saving Offshore | Bad News For Isle Of Man Customers 

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