The Irish Government is raising the limit on its deposit guarantee scheme from €20,000 (£15,800) to €100,000 (£79,300).

The move will put pressure on the UK Government to follow suit by raising the limit on its savings protection scheme from the current level of £35,000. It has indicated it may lift that figure to £50,000 but even this would leave it some way short of the guarantee of nearly £80,000 provided by the Irish.

The Irish scheme will cover depositors for the first 100,000 euros they have in each bank, building society or credit union. The cover will extend to savings and current accounts.

The move by the Irish Government, set against the backdrop of turmoil in the banking sector, is designed to reassure depositors that their savings are safe.

Brian Lenihan, the Irish Minister for Finance, said “The Government is committed to the stability of our financial system, so that money placed with an Irish credit institution would not be at risk. This measure provides additional reassurance to depositors in Ireland that their savings are safe. The new guarantee level is now among the highest in the EU.”

Rachel Thrussell, head of savings at Moneyfacts, the financial information group, says Ireland's move could trigger a flight of UK savers’ money across the Irish Sea.

She said: “We could see an outflow of money from UK savings groups because Irish institutions will have a much higher level of deposit guarantee. Banks such as Anglo-Irish Bank already offer UK depositors attractive interest rates and are regularly featured in savings best buy tables. With this added protection for savers, they could look very attractive indeed.”

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