Is my Northern Rock Isa safe?

By THIS IS MONEY
Updated:

 

I have heard that Northern Rock deposits are now protected by the government - does that include my Isa? Aileen, Surrey

Alan O'Sullivan, savings and banking expert at This is Money, replies: Your Isa is completely safe given Chancellor Alistair Darling's pledge to safeguard the investments of all Northern Rock savers.

Before the Chancellor came out with this promise, the level of money in your Isa covered by the Financial Services Compensation Scheme depended on whether it was a cash Isa or a shares ISA.

If it is a cash Isa, your investment is protected up to £35,000 by the FSCS; for example, in the unlikely event that Northern Rock becomes insolvent, the FSCS will pay you 100% of the first £2,000 that you have lost and 90% of the next £33,000, a total of £31,700.

This is more than the average Isa balance, but it could be higher if you have invested your maximum ISA allowance of £7,200 (recently raised from £7,000) each year since Isas were created in 1999. However, if you have a partner, they can also use their personal allowance; therefore as a couple you could invest up to £14,400 in Isas per year.

If you have a stocks and shares Isa, more of your investment is covered, namely £50,000. The FSCS covers 100% of the first £30,000 invested and 90% of the next £20,000, which equals £48,000.

The point is that if you have more than £35,000 or £50,000, invested, this is nonetheless safe following the Chancellor's pledge. Whether it is an Isa or an instant access account, the entire balance of your investment at Northern Rock is now secure regardless of what happens to the bank.

>> Where should I put my savings?

>> Best cash Isa rates

Most watched Money videos