Can our trusted post offices become the best bet for savers?

January 28th, 2009 by admin | Filed under Money Management, Recession, Saving, UK Bank Accounts, UK Banks, savings accounts.

With all the talk of toxic banks, recessions, Bernard Madoff and negative inflation, it is no wonder that that intrepid sector of the UK population who actually have some savings are looking for a safe and steady haven to deposit their savings, having given up hope of earning any interest from the money over the next few years. And the answer could lie right under their nose, and it has been there for years; the friendly post office. Experts now agree that local post offices could well become the UK’s most high-profile bank, with a network of branches in every town and just about every community in the UK

A conclusion is rapidly being reached among leading financial experts that the UK Government, instead of rushing to close Post Office branches should be looking to strengthen them. Instead of ploughing billions into stoking up the coffers of the major banks, they should set aside the comparatively minor amount that would be required to promote the interest of the Post Office’s banking division.

Coming in the wake of the interim findings of a House of Commons committee, that shows that Government ministers continue to be positive and even enthusiastic on finding means to promote the interests of the Post Office and not only protect the remaining network but also find ways to expand it in the future.

The committee is expected to announce that although many of branches of the Post Office are lacking in proper management, operating using less than advanced technology and have suffered from a serious and long term investment program, the public at large seem to have retained trust and loyalty for their friendly post office and might well be more comfortable in depositing their savings there.

Issues such as the Royal Mail’s pension deficit of around £7billion pounds fades in comparison to the ” bottomless pit” that could run into the hundred million mark that the major banking groups will require to survive over the coming years.

Another problem that the Post Office banks are facing is that more than a half a million account holders have lost their savings cover, under the UK protection scheme. They were informed by mail that their savings were no longer covered by the Financial Services Compensation Scheme, with it instead being covered by the Irish Deposit Protection Scheme.

The Post Office’s financial products have worked in tandem the Bank of Ireland for a number of years, and with their nationalisation the cover can no longer be provide. It is expected that the UK Government may need to intervene to solve the problem.

A sign of the faith that the British public still retains in the Post Office as a whole is a recent statement from the Commission for Rural Communities stating: “There may be scope for enhancing banking services and credit availability by making more use of the Post Office - perhaps by the Government working directly with the Co-operative Bank as well as others to increase lending in rural areas.”

Is it back to the future for UK’s Post Office banking system?