Rock of Stages
Northern Rock ISA customers who responded to the run on the bank by taking out their cash ISA can now put it back and keep the tax advantages. Normally cash in an ISA has to be transferred to another ISA to keep the tax free status. But that rule has now been waived for Northern Rock customers who took out their ISA in cash between 13 and 19 September. And they do not even have to put it back in Northern Rock. They can put it into any cash ISA and the interest will clock up tax-free.
This latest step in the protection of money in Northern Rock confirms it is now the safest place for your savings. Not only has no existing saver lost even a penny but no-one can lose a penny in the future. Two weeks ago the Government extended the guarantee it had made to existing Northern Rock customers to all new savers as well. So if you are at least 50 you can safely put up to two million pounds into a Northern Rock silver savings online account and earn a taxable 6.3% safe in the knowledge that if the bank does go bust the Government will step in and pay back not only all your capital but all the interest earned or promised too.
This is a quite extraordinary guarantee (the upper limit is set by Northern Rock not by the Government) and the Government says it will be maintained "for as long as the current period of financial market instability lasts." You can earn slightly more with a few other banks the top rate at the moment is 6.41% with ICICI or Bradford & Bingley. But with them only the first £35,000 is guaranteed in the very unlikely event of the bank collapsing. It is only unlimited with Northern Rock making the bank as safe as National Savings and it offers a better return.
When the Northern Rock problems became public the message from the Bank of England to customers was Dont panic! But now it seems that is just what the Bank itself is doing as it desperately tries to keep confidence in one bank in particular and all banks in general. First the Bank promised to lend Northern Rock what it needed to carry on. Then it offered to lend more on less collateral. Then it promised this offer would be extended to any buyer of Northern Rock. Almost at once it guaranteed all existing savings in Northern Rock together with any interest earned or promised. Then it guaranteed the first £35,000 in any bank deposit account. Next it guaranteed all new savings in Northern Rock. Now it has changed the law for the Northern Rock ISA so no-one lost money there either. Panic? The Bank of England? Never!
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