Icesave compensation set to begin

By Bob Howard BBC Radio 4's Money Box

Customers do not need to do anything and will be contacted

Customers of Icesave whose accounts have been frozen following the collapse of the Icelandic bank Landsbanki should receive compensation by 30 November.

The Financial Services Compensation Scheme (FSCS) will be contacting about 230,000 customers in the next 10 days to explain the process.

The Treasury has said every UK customer will get back their savings in full.

The move comes despite stalled talks between Britain and Iceland over what it can pay back to UK account holders.

Clear timetable

The vast majority of retail customers will receive their money during November Jonathan Clark, FSCS

The FSCS's head of claims, Jonathan Clark, explained how it will work:

"They'll be guided through the FSCS claims service so they can access their savings , view their balances and then transfer their money to their linked accounts.

"The money will then be paid by BACS into their linked accounts within two to three days after that's been completed."

Customers will then receive a confirmatory e-mail to confirm the transfer has been carried out.

Jonathan Clark says there is a clear timetable for the process:

"We anticipate we'll be completing the whole process so the vast majority of retail customers will receive their money during November."

Lost interest?

The Treasury has said that people will not lose their tax status for their ISAs but no details have yet been released over how this will be done.

Interest on normal savings accounts will only be paid up until 8 October when Icesave was declared in default

Those with fixed rate bonds can opt to wait for them to mature and then receive the interest due up until the maturity date, or cash them in.

The FSCS has not clarified yet if those who decide to cash their bonds in immediately will lose interest by doing this.

'Progressing well'

Icesave's customers have been told they do not need to do anything at this stage and that they will be contacted by the compensation scheme in due course.

The FSCS says it has already begun processing compensation applications from customers of Heritable and Kaupthing Singer and Friedlander whose accounts were not transferred to ING Direct.

Jonathan Clark says the compensation schedule for these customers is progressing well:

"We've issued application forms to all of the retail depositors there and have already processed several claims for Heritable account holders and payments were issued yesterday to them."

BBC Radio 4's Money Box was broadcast on Saturday,
25 October 2008 at 1204 BST.

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