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Thousands of Post Office customers have been told that their money is no longer covered by the UK's savings protection scheme.
More than 500,000 account holders received letters earlier this month telling them that the Financial Services Compensation Scheme (FSCS) no longer protected their money because the Irish Deposit Protection Scheme was now covering them.
The Post Office's financial products are provided through a partnership with the Bank of Ireland, which is why the change has been implemented.
The Irish government announced last year that it would guarantee all money held with Irish banks until September 2010, meaning the cover offered by the Irish protection is higher than that offered by the FSCS.
A Post Office spokesman said: "We wrote to customers more than two weeks ago to explain that as the Irish Deposit Protection Scheme had been raised late last year, it automatically replaced the cover provided by the British scheme which was lower.
"We have made clear to our customers that Post Office savings products offered in conjunction with our banking partner, the Bank of Ireland, are covered without upper limit by the Irish government until September 2010 and that remains the position."
The website of financial watchdog the Financial Services Authority's states: "It is the home-state scheme's responsibility to pay up to its maximum limit.
"Following increases in the compensation limits in Ireland, the Netherlands and Belgium at the end of 2008, consumers have greater protection than the FSCS offers and so are not covered by the FSCS."
People who have money invested in the Anglo Irish Bank, which was nationalised by the Irish government earlier this month, are also affected by the move.
Following the Irish government's guarantee, Britons poured money into the Irish banks last year, with evidence suggesting that applications to the banks from UK customers soared three-fold after the announcement.
After the industry in Ireland stopped offering market leading rates, the trend appears to have abated, while there are also suggestions that some nervous consumers moved their money back to the UK after the Government took big stakes in some of the country's high street banks.
Copyright © Press Association 2009
