Northern Rock customers to lose 100% savings guarantee

Customers with Northern Rock are to lose the 100% savings guarantee put in place when the bank was nationalised in September 2007.

Northern Rock chief executive
Gary Hoffman

The government, in consultation with the Financial Services Authority, has reviewed the guarantee that protected all of the savings held by customers at Northern Rock.

It has ruled that the bank is now strong enough to release the government guarantee on customers’ savings, following Northern Rock’s restructure in January.

Existing fixed term accounts will still have the 100% guarantee for the remaining term of the product, while existing variable rate accounts will retain the guarantee until May 24.

Northern Rock will continue to be covered by the Financial Services Compensation Scheme which provides protection of up to £50,000 per person per institution.

Gary Hoffman, chief executive of Northern Rock, says: “This is another positive step in the right direction and the decision reflects our good progress and the strong capital position of Northern Rock.

“The company is returning to a level playing field and our savers will enjoy exactly the same level of protection, under FSCS, as customers of other UK banks and building societies.”

Paul Myners, financial services secretary to the Treasury, says: “The guarantee of retail deposits was a vital step that restored confidence in Northern Rock’s operations when its customers were worried about its soundness.

“Over the last two years, we have worked to get the bank back to financial health. 

“Our goal is to see the taxpayer get a good return on its investment.”

On January 1 Northern Rock underwent a restructure, splitting the old bank in two.

’Northern Rock plc’ was created out of the old business to offers savings and mortgages and holds retail deposits and some of the bank’s mortgages.

’Northern Rock Asset Management’ is the remaining part of the business holding and servicing the majority of Northern Rock’s mortgage book.