FSCS reassures Northern Rock savers after Virgin takeover

The Financial Services Compensation Scheme (FSCS) has reassured savers with Northern Rock plc and new owner Virgin Money that account holders will have separate cover at each of the two banks.

The announcement yesterday led to speculation that the sale would affect future FSCS payouts to investors with savings in both organisations.

But chief executive Mark Neale said the FSCS would treat the newly-branded Northern Rock branches as separate to Virgin.

"Those people who have money with both Northern Rock and Virgin Money can be reassured that the two brands will operate under different banking licences," he said.

Customers with savings in both would therefore be able to claim the current £85,000 cap for each account in future compensation payouts, he added.

In cases where firms plan to operate under one license, however, the FSCS have reiterated the cap will still apply.

In September, when Norwich & Peterborough (N&P) merged with the Yorkshire Building Society, an N&P spokesperson told investors with money in deposit accounts at both societies that their savings would be treated as one entity.

"On the merger taking effect, N&P will also become a trading name of Yorkshire, so the overall limit of £85,000 under the FSCS will apply to eligible savings with any one or more of the Yorkshire, the Chelsea, the Barnsley and the N&P brands," the statement read.

After its nationalisation in 2007, the Newcastle-based lender was split into two arms. Northern Rock plc, the part sold to Virgin for £750m, manages the lender's retail deposits. Northern Rock Asset Management, still owned by the taxpayer, holds mortgage debt estimated at £50bn.