Safe savings: the saga continues (update)

We've had a torrent of questions about the compensation you'd receive if your bank hit the rocks while looking after your savings. Simon Gompertz got to the bottom of it all on Monday's show… (business update at the bottom)

How much is covered?

The amount you receive is simple enough, up to £35,000 for each customer of each bank. But banks come in all shapes and sizes and some are groups of several banks, so you actually get more protection in some than you do in others.

If you have a joint account, each account holder gets £35,000, so the total is £70,000 for the account

It's also worth knowing that the £35,000 of deposit protection you get is likely to be raised to £50,000 next year, subject to a consultation that's going on right now.

High Street

The basic principle is that for each bank, you get £35,000 of deposit protection. But the problem comes with what I'm calling multi banks - one group which owns several banks.

Natwest

They can be like NatWest and Royal Bank of Scotland, which are part of the same company, RBS - but if you have one account with NatWest and one with Royal Bank of Scotland, you get £35,000 protection for each, a total of £70,000.

Abbey/Alliance & Leicester

Alliance & Leicester and Abbey are like this too - combining in the same group, but each offering the full protection. A multi-bank with multi-protection.

Nationwide

In contrast, Nationwide is just taking over Cheshire and Derbyshire Building Societies - but customers with accounts in both the Nationwide and the Cheshire for instance, will only quality for a total of £35,000 compensation once the merger takes place at the end of the year.

The reason is that every bank has to be authorised to take deposits - but they can choose whether to have one authorisation for the whole group and just one slug of £35,000 for each customer - or separate authorisations for each bank the group owns.

Halifax

Halifax Bank of Scotland has been the same as Nationwide, a maximum of £35,000 across the two banks.

Lloyds TSB

But Lloyds is taking over Halifax Bank of Scotland, so there's an extra complication. Until the merger is completed maybe at the end of the year, the licences will remain separate, so two chunks of compensation. After that, we'll have to wait and see.

Internet

A lot of people are depositing their savings with foreign banks, often via the internet - what happens with them? You do need to check because a European bank can do business here but only offer their home country's protection which could be lower.

Good news if you're with an Irish bank such as Anglo Irish though - over the weekend the Irish Minister of Finance announced an extension to the Irish protection scheme. From now on customers are covered for up to 100,000 Euros - roughly £80,000. Which means those savers actually have more than the £35,000 protection the FSA offers in the UK.

Edit: Tuesday 23 September

Gary from Cheshire emailed in to ask about protection for his business accounts - he says he has more than one with the same bank. We contacted the FSA, who told Adam that small businesses qualify for the same protection as personal savings, as long as they fulfill two of the following criteria:

- they have a turnover of no more than £6.5m

- they have a balance sheet of less than £3.2m

- They have less than 50 employees