What protection do savers have ?

So the Government have promised all existing Northern Rock savers that their money is safe. But what protection do savers have in any case?

The Financial Services Compensation Scheme covers 100% of the first £30,000 and 90% of the next £20,000 of an investment or savings plan if the firm who provided it is unable to meet its obligations. However 'deposits', i.e bank and building society accounts, are only covered for 100% of the first £2,000 and 90% of the next £33,000.

There are rules though, and some investors/depositors are not covered - the full FAQ is available here : http://www.fscs.org.uk/consumer/faqs/.

So if you have £75,000 in a savings account and the bank goes bump, assuming you meet all the criteria you would be covered but only for £31,700.

Similar protection schemes cover other types of financial products, including the Policyholders Protection Act.

It is very unlikely in any case that the Government would allow Northern Rock to fold - this would destabilise the banking system and cause havoc with the economy. One investor was quoted as saying that he didn;t trust the Government promise, and was therefore withdrawing his funds and reinvesting them into gilts (which are Government stock, and certainly aren't as safe as a bank account!)

To get back to basics, any saver or investor should be aware of the risks involved with any investment - even a savings account can lose you money if it is paying a rate if interest which is less than the rate of inflation (and it's surprising how many are!). If prices are rising by 3% and you are only receiving 2% interest, the net result is that your money is falling in value by 1% per annum. Put it under the bed, and you lose 3% per annum in this scenario!

Our advice is always to assess the level of risk you are prepared to take with funds, via a risk profiling exercise, and then take advice as to an investment which matches this level of risk. We can assess risk, make recommendations and manage funds on an ongoing basis - better than sleepless nights!

Northern Rocky!

Current update below! Northern Rock are not a company we have recommended to our clients in the past, mainly due to their tendency to charge high fees and large redemption penalties on mortgages, but it shows what media hype can do to a company, even one as well known as Northern Rock. Realistically, savers are panicking when there is very little reason to do so - Northern Rock are in a similar position to Barclays who also had to go to the Bank Of England for emergency funding just a few weeks ago - but the fact that Northern Rock's situation has been massively overhyped as a sign of impending doom seems to have meant that it will, untimately, be forced to sell up or ship out.

"Britain's fifth largest mortgage lender was today deluged by panicking savers for a third day as they lined up at Northern Rock branches to empty their accounts after the bank opened early to accommodate the anticipated rush. An estimated £1.5 billion to £2 billion was withdrawn by Northern Rock savers on Friday and Saturday after the mortgage lender was forced to go to the Bank of England to seek emergency funding.

The crisis-hit lender's share price plummeted by 36.93 per cent today despite the bank's embattled chief executive, Adam Applegarth, attempting to reassure customers and investors the bank is a "viable" business.

It has also emerged that Northern Rock had asked Lloyds TSB to acquire the bank but that the deal was blocked by the Bank of England and the Financial Services Authority (FSA). There was speculation today that National Australia Bank was another possible rescuer."

www.pensionadvice.net

Zen are pleased to announce the launch of our new website - http://www.pensionadvice.net/ - designed to allow people to have their pension questions answered easily and quickly by a qualified IFA.

Rather than give bare information which may or may not be relevant to your particular circumstances, pensionadvice.net enables you to get a specific answer to your specific question, from a real life Independent Financial Adviser (IFA) within 24 hours of your query being received.

Our response will give you factual information regarding your query, but we cannot give specific recommendations without further information. If we feel that you would benefit from further specific advice, we will suggest a meeting with one of our Independent Financial Advisers who can go into greater detail regarding your pension arrangements.

Visit http://www.pensionadvice.net/ for more information and ask us a pension question !

Stupid Dog!

Well, I spent yesterday evening at the Vets whilst the vetinary surgeon on duty tried valiantly to remove the contents of my dog's stomach before the large bar of Exlax he had eaten not half an hour earlier worked it's magic.

Luckily she managed to complete the task in time and the dog emerged looking very sorry for himself but thankfully avoiding the inevitable consequences which would have ensued had we not got there in time! Thank goodness for slow acting laxative ;-)

Whilst in the waiting room I was intrigued to hear another canine patients 'mummy' (as she referred to herself) list the various treatments she treated her dog to, including Reiki healing to mention but one! I am always amazed by the things people spend money on, and this one must be near the top of the list - the IFA in me wondered whether she had sufficient savings for her retirement whilst she was having her dog's head examined.

Seriously though, vets fees are rather steep - it cost £50 to vacate the stomach of a Jack Russell (but worth it rather than doing the deed at home!) and, having only recently insured the little fella, it made me regret not covering him earlier via pet insurance, which is after all not that expensive.

Oh, and the drawer containing medicinal items will be kept firmly shut in future....

Market movements and risk profiling

We have had a few comments in the last couple of weeks concerning the recent market volatility and I have thankfully been able to put clients minds at rest. The extent to which you may have been affected by the recent ups and downs really depends upon whether your investment was suitable for you in the first place and whether it is being managed professionally.

We find that many new clients have the odd pension or PEP sitting around, and nine times out of ten the moneys are invested in a ubiquitius 'Managed' fund. 100% of the money in one fund - and this is when clients get hit by market movements.

Any investment should suit a clients' risk profile and be diversified, whether it is a £1 million portfolio or a £20pm personal pension. With all new clients we carry out a full risk profiling exercise and then suggest funds which suit both the results of this exercise and also the clients age and timeline. That way we can be sure that any market 'blips' such as the recent correction do not affect clients more than they would expect to be affected!

Zen launches 'Complete Financial Security' service

Clients of Zen Financial Services can now rest assured that their finances are in the best possible shape following the launch of Zen's 'Complete Financial Security' service.

The 'CFS' service initially involves a complete and detailed review of clients' existing financial arrangements. Details are taken of all financial plans and products currently in place; these plans are then reviewed and, if necessary, restructured to ensure they are providing the right benefits at the right cost.

A full risk profiling exercise is also carried out to ensure that any investment-based financial arrangements in place are well-suited to the clients individual tolerance of investment risk.

Following the production of a full initial report, further half yearly meetings take place to ensure that the plans and arrangements agreed upon remain suitable.

For more information contact Zen Financial Services at info@zenfinancial.net or visit www.zenfinancial.net.

Return of the blog...

Welcome to the resurrected Zen Financial Services blog.

Look forward to lots of information which will help you manage your finances!

Should you any questions re any of our posts, please feel free to get in touch via info@zenfinancial.net.