At last, some good news from the FSA that will help savers

If your bank goes bust, deposits will be ring-fenced

For a change there was good news this week from the much-criticised Financial Services Authority. The City watchdog announced a shake-up to the Financial Services Compensation Scheme to ensure faster and fairer payouts to savers who lose money when banks go bust.

The scheme protects up to £50,000 per person per institution if a bank, building society or credit union collapses. But at present, if you have a loan or mortgage with the institution, it will be set off against your savings.

So if you have a loan of, say, £20,000, and £50,000 in savings in the same institution, you would only be compensated to the value of £30,000. That, to my mind, is a complete nonsense. In these times when people have been keen to ensure a safe home for their cash, it forces them, in effect, to keep their savings in a different financial home than the rest of their finances.

So I applaud the news that people's deposits are to be ring-fenced. It means we will be able to choose financial deals on the basis of the best we can find, rather than have the added complication of excluding certain banks or building societies.

At the same time, the FSA has promised that compensation will be paid within seven days, or within 20 at the most. In fact, the 20-day limit has been forced on it by the EU Deposit Guarantee Schemes Directive, but targeting a seven-day turnaround for compensation is laudable. It should put an end to the worry of suddenly being without your cash for an extended period.

The bad news is the new rules won't come into force until 2011, which means savers have to remain extra-vigilant about compromising their cash for another 18 months.

But there was some immediate good news for people with savings in different building societies which have since merged, such as anyone with cash in the Cheshire or the Derbyshire as well as Nationwide, which took them over. The FSCS has extended the rule which allows accounts in different societies to stay protected to December 2010. Existing rules would have forced savers to act by September, so that's an extra 15 months to find new, safe homes for savings.

Who benefits?

Elsewhere this week came news that a £2.48bn government scheme aimed at helping poverty-hit pensioners and hard-up families pay heating and lighting bills is failing. The Public Accounts Committee reported that the Warm Front scheme has helped only a third of the three million judged to be living in fuel poverty. It's supposed to help vulnerable folk pay for the installation of energy-saving measures such as insulation and double-glazing. As Alessia Horwich reports on page 96, such measures can help cut hundreds of pounds off annual fuel bills.

The problem is that the scheme was targeted at those who received non-means-tested benefits, such as income support, housing benefit and pension credit. But many people classed as being in fuel poverty – that is, they spend more than 10 per cent of their income on bills – do not receive the benefits, or do not claim them.

The energy and climate change minister, David Kidney, has promised to review the scheme and make improvements, which is clearly important. But it raises the issue, once again, of benefits and the fact that many pensioners turn their back on them.

The charity Age Concern and Help the Aged warns that one in three pensioners fails to claim benefits and allowances. Some are embarrassed or too proud to claim, while others are unaware of their entitlement.

So, if you know of anyone who may be missing out, offer to show them – a Direct gov site listing all the benefits and how to claim for them.

Claim blame

The Ministry of Justice is getting tough on dodgy claims management firms which offer to "buy" debt and then get it written off through a loophole in the law. This month, GloVista Red and Ezee Claims have had their authorisations suspended, while Claimwise Legal Services and Momentum Network have received cancelled authorisations and will no longer be able to conduct business.

The more of these unscrupulous companies forced out of business the better. In order to get their fat fees they prey on people's debt worries and confusion about their rights.

Carl Wright of Cartel Client Review warns: "Consumers must be wary of firms which make misleading claims of buying up debt.

"If cases go to court it will be the consumer who ends up in the dock, not the company."

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