New rules on savings accounts

If you have savings, do you know whether your bank has its own banking licence or shares it with another bank? No? I didn't think so. But, until January 1st this year, that's what you'd have to know (or be able to find out) before you could work out how your savings would be covered by the compensation scheme, should the worst happen and your bank go bust.

When the credit crunch was - frankly - scaring the socks off all of us and high street banking names looked like they might melt into a puddle, the government raised the limits for the UK's savings compensation scheme so that the first £50,000 of an individual's savings would be protected.

A good move. But what it didn't do at the same time was simplify the scheme so that the £50,000 limit applied to each bank (or banking brand). Instead, it stuck with the existing and unnecessarily complicated system of the £50,000 limit applying to each banking licence. This seemed absurd because there's no logic or pattern to which banks have their own licence (for example, NatWest and Royal Bank of Scotland) and which share a licence (Halifax, Bank of Scotland and Birmingham Midshires).

From the beginning of this year, bank, building societies and anyone else offering savings accounts will have to tell consumers how their money is covered by the compensation scheme. That means you should know whether you'd be able to claim the full £50,000 from each bank or building society that you have savings with or whether that total is spread across several different brands within the same group.

If you've saved with a bank based within the European Economic Area (the 27 EU member states plus Iceland, Norway and Lichtenstein), you'll also be told whether you're only covered by their country's own scheme or whether you may also be able to claim some compensation from the UK's scheme.

It's good that banks will actually be forced to tell consumers how their money will be protected. But it seems extraordinary that the scheme was set up in such a consumer-unfriendly way in the first place and that it's taken until now - well over a year after the credit crisis was at its worst - for banks to even be obliged to explain the rules to their own customers.

What do you think?