Page last updated at 18:12 GMT, Wednesday, 5 November 2008

Icesave refunds will take weeks

Icesave website
Icesave customers can soon trigger the process to get their money back

Some savers with the insolvent Icesave internet bank may have to wait nearly five more weeks to get their money.

Emails are being sent out this week from the Financial Services Compensation Scheme (FSCS) explaining the process to the bank's UK customers.

Refunds will be triggered in batches in the next three to four weeks, with the cash arriving five days later.

The bank, owned by Landsbanki, closed in early October, leaving 230,000 customers without access to their cash.

"The Icesave systems were not designed to pay all deposits at once," the FSCS explained to Icesave account holders.

"The electronic payment process will be phased to manage the demands on the systems and in the interests of security.

"Over the next three to four weeks, depositors will be sent a further email inviting them to initiate the payment process," it adds.

Isa accounts

Account holders will be asked to log on to the Icesave internet banking site using their existing user ID, and password.

From there they will be guided through an online application process to claim their compensation.

The UK government has promised that this means all UK customers will be repaid in full, with the money being transferred into their nominated bank account at another bank.

"You should be paid your compensation within five working days of completing the application," said the FSCS.

All savers will be paid the interest they accrued up to 7 October when Icesave closed.

The FSCS has also clarified what will happen to its popular Individual Savings Accounts (Isas), which the government has already said will retain their tax free status.

The money in the accounts will be transferred to the customers' nominated alternative bank accounts when the compensation process is triggered online.

They will then be sent an Isa certificate in the post within two weeks, which will allow them to reinvest the Isa money with another Isa provider.

The tax free status will be kept so long as the money is reinvested by 5 April 2009.

Long term accounts

Savers who had invested money in some longer term fixed-rate accounts lasting up to three years, who were not due to be repaid until maturity, have a choice.

They can request that all their money, plus interest accrued up until 7 October, is moved to a new bank account, using the online procedure for other savers.

Or they can leave their money in their Icesave account, and keep on accruing interest up until the normal maturity date, when the cash will be repaid.

"If you prefer to wait until the end of the fixed term, and receive interest which would have been due at maturity, the electronic process option is not available to you," said the FSCS.

"However, you should still log on to the website and tick the appropriate box to confirm that this is your wish."

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