'No floods' of switching savers

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Savers are remaining calm about their savings and not switching banks despite uncertainty in the sector, an industry body has said.

No significant spike in transfers between accounts has been recorded by the UK payments association Apacs.

But some firms said they had received more enquiries from savers wishing to move their money.

The government is to raise the limit on guaranteed bank deposits from £35,000 to £50,000 per banking group.

The Irish government raised the bar with a guarantee on Tuesday to protect all deposits in six savings groups.

Limitless

There were no obvious signs of savers flocking to banks such as the Allied Irish Bank in the UK following the announcement.

We are living in strange times, when names in banking that we previously thought were unassailable are being caught up David Black, Defaqto

But there have been some questions raised about whether the 100% guarantee might give these Irish institutions a competitive advantage.

Prime Minister Gordon Brown called on the Irish government to look closely at the new guarantee to ensure that it complies with European Union competition law.

The same competitiveness argument has been voiced about government-backed National Savings and Investments (NS&I) and Northern Rock in the UK, which have a 100% guarantee.

The UK government had said implicitly that savers' money would be completely protected, and Mr Brown pointed out that no depositor had lost any money at all so far.

Earlier the limit on guaranteed bank deposits had been £35,000.

'Safe haven'

Analysts at payments association Apacs say that that no significant peak has been spotted on transactions through the Chaps transmission service.

This service allows money to be transferred from one account to another in a day and is generally used for large sums of money.

The slower Bacs payment system - which underlies telephone and internet banking services - has also failed to show any trend of savers shifting their money.

But this system is used for automatic payments such as direct debits and wages. As a result payments are made in huge numbers at the end of the month, making other movements of money harder to spot in this week's figures.

However, a spokeswoman for the Post Office - where savings products are backed by the Bank of Ireland - said there had been an increase in customers since the Irish government's announcement.

NS&I reported an increase in calls to its call centres but said it was too early to see if this had filtered through to sales.

And Abbey, owned by Santander which bought Bradford & Bingley's savings arm this week, claimed it was now seen as a "safe haven" and was seeing more savings custom.

Large savings

Figures from the British Bankers' Association published last year suggest that 4% of the 150 million deposit accounts in the UK had funds in excess of the current guaranteed safety threshold of £35,000.

The system was initially changed to ease the Northern Rock crisis

Some 2% of these contained funds in excess of £50,000.

However, these figures pre-date much of the banking crisis and it is highly likely that many of these savers have since spread these funds among various accounts.

This remains the advice to consumers from banking analysts such as David Black, of Defaqto.

"There is a safety net. We are living in strange times, when names in banking that we previously thought were unassailable are being caught up," he said.

He suggested that the relatively small number of people with large savings pots keep up to £34,000 in each account so their deposits, and interest on it, were safe.

Banks have seen the opportunity to capitalise on the possibility of people opening more savings accounts in order to spread their money around, offering rising rates of interest.

Lloyds TSB announced on Wednesday that it was unveiling two new savings accounts, including an instant access account.

Mr Black said that consumers should study terms and conditions on all savings accounts as some have restrictions on withdrawals and changes in interest over time.