Savers spread funds to take advantage of protection rules

FSA confirms limit to be raised from £35,000, with accounts held in joint names to receive up to £100,000 in compensation

Consumers have started to spread their savings around to ensure they stay within the limits covered by the depositors' protection scheme.

As of Tuesday, consumers will be guaranteed to receive the first £50,000 of any money they have on deposit should their bank or building society go bust – as long as the institution is a member of the Financial Services Compensation Scheme. Accounts held in joint names will receive up to £100,000 of compensation.

Stronger institutions such as Abbey, owned by the Spanish banking giant Banco Santander, have seen a rush of inflows in recent days, while Halifax, Bank of Scotland, Intelligent Finance and Birmingham Midshires – all owned by the HBOS group – are believed to have seen a rise in outflows of depositor funds..

Thousands of British consumers have also begun transferring their savings to Irish banks, such as the Anglo-Irish Bank, which is paying a very competitive interest rate of 6.4 per cent on its instant access account, since the Irish government's decision to provide a full guarantee to the country's six largest banks this week.

"There is no denying that we are seeing a flight to safety for savers," said Reza Attar-Zadeh, director of savings and investments at Abbey. "Abbey has seen a marked increase in savings inflows in recent weeks, up 270 per cent in our branches alone, due to our strong financial position, backed by the financial strength of a top 10 global bank, Santander."

HSBC and Nationwide Building Society are two other winners of the current turmoil, claiming to have seen "a significant increase in retail deposits", while National Savings & Investments, which is government-owned, has also seen a continued rise in deposits, in spite of its relatively uncompetitive rates.

Some of the companies with the most competitive savings rates have seen mixed fortunes. Icesave, which is owned by the Icelandic bank Landsbanki, said it had continued to see a strong number of inflows into its savings accounts – all of which offer very competitive interest rates. However, they have also seen outflows, as some consumers have worried about their stability.

The Government has repeatedly argued that 96 per cent of depositors are covered in full by the £35,000 guarantee, which will rise to 98 per cent once the maximum compensation is raised to £50,000 next week. However, these percentages do not take into account the fact that the small numbers not covered by the guarantee include depositors with very large sums.

Jonathan Pierce, an analyst at Credit Suisse, said: "This is the wrong statistic to focus on – [data shows] that 51 per cent of deposits by value are over £35,000 and 43 per cent are over £50,000."