Icesave compensation and the FSCS...What happens to my ISA?

Wednesday, 8th October 2008 16:02 - by Resident IFA

In light of yesterday’s chaotic events in Iceland, I didn’t bat an eyelid. I have savings with them, but only just over the Icelandic Financial Supervisory Authority’s (IFSA) maximum level of compensation payable - €20,887 or £16,300 (approximately). I won’t lie in that it is a pain to think I may have to seek compensation from the IFSA, then also seek only a few hundred pounds from the British Financial Services Compensation Scheme (FSCS), but there you go. Of course, my tune would change if I had, say, £100,000 with Icesave, potentially suffering a 50% loss. This even makes an existing stockmarket investment currently seem as attractive, the FTSE All-Share Index having fallen by 51.68% on its 52-week high, looking at BBC’s website a minute ago (15.37 hours). My comfort came in that no depositor in a UK (based or not) Bank has yet to lose a penny. Northern Rock is as safe as houses, now that is nationalised and Government-owned, and Bradford & Bingley’s deposit base has been farmed out to the Santander Group – seemingly still a sound organisation. These questions remain in my mind, however: o How long will it take to retrieve my money from Iceland? o Will I still be paid interest for that transitional period? o All my money is in a Cash ISA. Will it still hold ISA status i.e. can I transfer it to another UK Bank or Building Society without it losing its tax-free status? The third question bothers me most. I don’t fancy paying a 20% or 40% tax rate on these monies. It would take 5 years of maximizing my £3,600 Cash-element ISA to recoup the tax-free status of these monies, but still effectively being the same amount ‘down’ on having contributed these monies on top of those from my Icelandic folly which should have been safely tax-free all that time. Anecdotal evidence suggests that customers of the other UK Banks that have been bailed out or nationalised this year were allowed to transfer and maintain the tax-free ISA status of their deposits. I think it only common sense and fair play for Mr.Darling to ensure the same happens again here. How have you been affected by the Icelandic meltdown (A contradiction in terms?!)? I would be interested to know this and if you have a definitive answer to my first two questions, above. Until next time...