Northern Rock 100% savings protection likely to go

It says the matter is up for review but also states the full guarantee was never supposed to be forever (see the Safe Savings guide).

A Northern Rock spokeswoman says: "We can confirm the savings guarantee level is under review but no decision has yet been taken.

"I can't confirm when a decision will be made but it is likely to be in the next few weeks. The 100% guarantee was never intended to be permanent."

Northern Rock savings accounts are expected to eventually revert to the £50,000 per person, per financial institution protection given to most other savings accounts if the provider goes bust.

However, anyone on a fixed rate deal will maintain their 100% guarantee until the account's maturity date.

The Treasury must give three months' notice before taking away the cast-iron guarantee, introduced by the Chancellor on all Northern Rock deposits in 2007 following a run on the bank, which eventually saw it taken into Government hands.

Northern Rock sale

The move is seen as another major milestone in the sale of Northern Rock, following its split in two on 1 January 2010, when it spun off a savings and mortgage bank called Northern Rock PLC, effectively the "good" part of the bank which will be sold off to the private sector.

Tesco and Virgin Money are thought to be two of the suitors lining up a bid.

What next for savers?

Martin Lewis, MoneySavingExpert.com founder, says: "There is no panic here, though if the 100% guarantee disappears, this is something Northern Rock savers should be aware of, just as savers in any bank should fully understand the safety of their cash."The real protection savers have, even without the full guarantee, is that it would be ludicrous for the Government to flog this bank to a company that would allow it to go bust. If it did, it would call into question our entire method of government. 

"Having said that, for belt, braces and buckles, the rule is always if you're saving over £50,000 spread it around institutions.

"Those who put their money in Northern Rock purely for 100% safety's sake, and sacrificed getting a decent interest rate, should take notice.  

"If the guarantee disappears, it is worth reviewing your rate and seeing if you can get more elsewhere by spreading cash so you’re not over the £50,000 limit anywhere."

Further reading/Key links

Best rates: Top Savings, Top Fixed Savings Stay safe: Safe Savings