How safe are your savings if you bank with Halifax or Bank of Scotland? What if you have savings with both Halifax and Lloyds TSB? Are you still protected?
If you bank with HBOS and are worried about your savings, then you're not alone. Since the merger of the two banks was announced, The Fool has been inundated with questions from readers about the safety of their savings.
We all know that concern over just this issue caused the run on Northern Rock last year.
But there is no reason to panic today. The fact that HBOS has been bought by Lloyds TSB means it is more unlikely than ever to collapse.
And even if it - or any other bank - did run into trouble, the Government has stepped up the protection it offers savers in a bid to stave off another run on a bank.
What protection is on offer?
Since last summer, the Financial Services Compensation Scheme (FSCS) guarantees savings of up to £35,000 per financial institution.
This means, if a bank collapses, as long as you have less than £35,000 of savings with that bank, you are guaranteed to get your money back.
So if you're lucky enough to have more than £35,000 put aside for a rainy day, as long as your savings are split into separate chunks of £35,000 and held at different financial institutions, you're 100% guaranteed to get your savings back.
What's the catch?
Different accounts - and even different banks - don't necessarily count as different institutions under the FSCS's regulations. In order to do so, banks must have separate registrations with the Financial Services Authority (FSA) - but mergers and take-overs can mean that several banks might share the same FSA registration. To guarantee that your savings are as safe as possible, you need to know which banks are in bed with one another.
What does this mean if you bank with HBOS and Lloyds TSB?
At the moment, if you have £35,000 in savings in a Halifax account and £35,000 in savings in a Lloyds TSB account, both chunks of £35,000 are guaranteed by the FSCS.
This is because, at the moment, the two institutions still have separate registrations under the FSA - so you can safely keep up to £35,000 with HBOS and up to £35,000 with Lloyds TSB, and claim full compensation with the FSCS for both accounts.
This may well change in the future, with both Lloyds and HBOS one day coming under the same registration. But this has not yet been decided.
Should this occur, the new super-bank of Lloyds TSB/HBOS (whatever it will be called!) promises to let all its savers know well in advance beforehand, so that you have ample time to move your savings over to a new account with a different institution.
Certainly, The Fool will endeavour to report this development as soon as we hear of it. But if you do have £35,000 in each institution, while your savings are perfectly safe for the moment, it may be wise to start shopping around for a new savings account sooner, rather than later.
That way, you'll know which are the best savings rates available and can move quickly if you find you need to switch your money to a separate institution.
Which banks are connected at the moment?
Below, we reveal the big name savings providers that are grouped together under the FSCS's rules. Avoid having more than £35,000 saved in any of the eight groups listed here in order to make sure you aren't caught out in a crisis.
So, to be clear, you could have £35,000 with Yorkshire Bank in group 4, £35,000 with Bank of Ireland in group 6, and £35,000 with Abbey in group 8. But you can't have £35,000 with Abbey and £35,000 with Cahoot. (Well, you can, but the FSCS will only compensate you up to £35,000 for those two accounts.)
(1) Lloyds TSB, Cheltenham & Gloucester
(2) Halifax, Bank of Scotland, Birmingham Midshires, Saga, The AA, Intelligent Finance
(3) The Co-Operative Bank, Smile
(4) Yorkshire Bank, Clydesdale Bank
(5) Royal Bank of Scotland, Direct Line
(6) Bank of Ireland, Post Office
(7) HSBC, First Direct
(8) Abbey, Cahoot
One exception to this rule is NatWest, which - although owned by Royal Bank of Scotland - runs as a separate institution. Having money saved with NatWest won't affect any savings you might have with RBS or Direct Line should problems arise.
If you're still not 100% sure about your own situation, take a look at a website called How Safe Is Your Money? Input how much cash you have put by, where you've saved it, and the website's tool will calculate how much of your money you might lose if your savings providers went under.
Finally, some good news: if you have joint savings accounts with a partner or spouse, the FSCS's guarantee is doubled to £70,000 per institution. Remember, though, that this is common sense rather than kind-heartedness - twice the protection can only be offered to twice the number of individuals, so it only applies if your account is officially in two names.
> You might be hit by similar problems if you try to transfer a balance from one credit card to another. Read When Balance Transfers Go Bad to see which cards are linked.