Halifax Bank of Scotland merges with Lloyds TSB - are your savings safe?

Halifax Bank of Scotland is going to merge with Lloyds TSB and lots of you are quite rightly concerned about whether your savings are safe.

Halifax Bank of Scotland are merging with Lloyds TSB, which is a rescue deal as Halifax Bank of Scotland shares have plummeted in recent days amid concerns for its future. Lloyds TSB bought Halifax Bank of Scotland for a knock-down price of £12bn. Lloyds TSB are keen to point out that the merger with Halifax Bank of Scotland will help encourage stability in the financial markets and help improve confidence in the global financial system. Lloyds TSB confirmed jobs would be lost as a result of the merger with Halifax Bank of Scotland, but played down claims that up to 40,000 staff faced the axe.

The Lloyds TSB and Halifax Bank of Scotland merger has got savers in a panic, worried about whether their savings are safe. The Financial Services Compensation Scheme, covers 100% of the first £50,000, per person, per deposit taking institution. Therefore, if you ensure that you don't have more than this limit with any one provider, if in the unlikely event the worst should happen, you will get all your money back. As each individual person is covered if a couple have up to £100,000 in a joint account, then in the event of a bank failure they can both claim separately up to the £50,000 limit to get back all their savings.

Savers need to be vigilant however, as if the savings account providers are registered under one banking licence, your savings will only be covered once.

For example Bank of Scotland, Halifax, Birmingham Midshires, Intelligent Finance and SAGA are all covered under the Bank of Scotland banking licence. This means that if you had £50,000 in savings with each of them, should they all have problems repaying your savings, you would only receive £50,000 back from the Financial Services Compensation Scheme, not £250,000 you held in savings accounts. However, the Sainsbury Bank brand which is part of the Halifx Bank Of Scotland group has a separate banking licence.

The situation varies from savings institution to savings institution. NatWest, Royal Bank of Scotland, Tesco Personal Finance, Ulster Bank and Coutts & Co are all part of the same group, but all have separate banking licences. Thus, if your savings was with each of them, you would receive up to the full £50,000 back from each company.

If you're still concerned about the Halifax Bank of Scotland and Lloyds TSB merger in respect of whether or not your savings are safe, the best thing to do is to either log on to the FSA's website www.moneymadeclear.fsa.gov.uk or call their helpline on 0845 606 1234.

If you are planning on opening a new savings account it's wise to make sure you know which savings institutions your existing savings are with and check with the new savings account provider that they are not part of the same group and covered by the same banking licence.