ING Direct pays 3.1% but you’re NOT protected like other UK savings

ING Direct pays 3.1% but you're NOT protected like other UK savings

It’s back advertising on the TV.  The giant Dutch bank uses the ‘sailor’s rubber ring’ image of safety and security to promote its savings – and at 3.1% it’s nearing the top of the best-buys. Yet what the advert doesn’t address is that in the event ING Direct got into trouble, it’s the Dutch state that’d need to throw in that ring to rescue drowning UK savers, not the British government.

Please don’t read this as a suggestion that ING Direct is in trouble.  It’s a major Dutch banking group and a bit of a powerhouse (though that’s not a recommendation one way or the other – I simply don’t look at bank solvency, it’s not my expertise, I focus on the protection system).  Yet it’s important every UK saver with money in it understands, in the unlikely event it gets into trouble, how it is protected.

ING Direct opts for the ‘EU passport’ scheme

Savings in all banks operating in the UK are protected by the Financial Services Compensation Scheme (FSCS) –  this includes Indian bank ICICI, Spanish giant Santander, or US bank Citibank. Yet EU banks can opt for the ‘passport’ scheme of protection.  ING direct is one of the very few left that do it.

This means UK savers need to rely on the Dutch government’s compensation scheme if it went bust  (see safe savings for more). The amount protected is now the same everywhere in Europe at €100,000 (£85,000 in the UK) so there’s no difference.  Yet it is worth considering in the unlikely event the whole system collapsed if such a major bank went kaput, then it’s likely government finances would be under strain too. Would the Dutch government choose to pay UK savers, who don’t get a vote in its elections?

The answer for such a central player in the EU is ‘probably’.  Yet even when the system has broken down in the past, the Icelandic government failed to live up to its passport promises, so the UK government stepped in.  So while that’s never guaranteed, again, it’s another safety net.   

So for people to lose money they’d need ING Direct to collapse, the Dutch government to refuse to pay out, and the British government not to step in. 

The Post Office changed, time for ING Direct to join it?

Post Office Savings got such a bad press on this (it was bizarrely covered by the Irish government as it’s savings accounts were provided by Bank of Ireland) that it decided to leave the EU passport system for full UK protection. Perhaps it’s time ING Direct did the same if it wants to be a major UK player.

All in all, it’s a very unlikely scenario – there is still a small risk, and I believe it’s one those being drawn in, to save with ING Direct, should be aware of.  It is a legitimate piece of information that can help them decide whether their money belongs there or not.  Of course, some may decide the Dutch government’s finances are stronger than our own – either way, it’s part of the decision process.

Of course, savvy MoneySavers will use the top savings guide and realise that while 3.1% is good, there are better deals – though this isn’t true for those being drawn in by adverts. Isn’t it time those savings accounts that aren’t protected by the UK’s FSCS scheme had to tell us. What do you think?