£800m payout to Iceland savers will begin in days

SAVERS whose money has been frozen following the Icelandic banking crash can expect to get compensation within days.

The Government said today it is making £800million available to compensate savers who lost money through the collapse of internet bank Icesave.

Chancellor Alistair Darling said the money was being transferred to the Financial Services Compensation Scheme to pay out to savers with deposits above the £50,000 limit covered by the scheme.

About 230,000 Britons lost money in Icesave when its parent company Icelandic bank Landsbanki was put into receivership last month.

The FSCS is expected to begin paying compensation to savers next week, and it hopes to have paid the majority of claims by the end of this month.

It sent out emails to Icesave customers yesterday setting out how the compensation process will work.

These will be followed by a second email, sent out in batches, giving people instructions on how they can log on to their existing Icesave accounts and complete an electronic process enabling them to receive their money.

The cash will then be paid into an account of their choice within five days by electronic transfer.

The FSCS normally covers only the first £50,000 held in a savings account, rising to £100,000 for couples.

But on 8 October, Mr Darling pledged that no depositor in Icesave would lose any money.

Compensation for the first £50,000 lost by savers will be provided by the FSCS, with the Bank of England initially providing a loan facility, while the Government will top up payments above this limit.

The compensation process for Icesave customers has been speeded up. It usually takes up to four months for people to receive money after a financial institution collapses.

The Treasury said discussions with the Icelandic government over recovering savers' money were "ongoing".

The first £16,951 that people have lost should be covered by the Icelandic depositors protection scheme.