Where can I keep my savings safe?

06 January 2009 :

Blog

by compareandsave.com Editors

Recent news has been awash with stories of the troubles being faced by UK banks, which has resulted in consumers worrying about where to put their savings.

In the recent poll we conducted, 20.4% (44 people) said they would feel their money was safest under their mattresses or elsewhere in their home, showing that consumer confidence in banks really is under question.

Before the credit crunch it was always assumed that savings were best off in a bank. Indeed, there are many reasons why this is the case. Firstly, money kept in a bank will be a lot harder for thieves to steal and, secondly, keeping your money out of the bank will cause it to lose value over time because of inflation.

However, there are ways of keeping your money in savings accounts while at the same time keeping it protected.

How much can I put in each bank? (Excel document 12.5 KB)

How is my money protected?

All UK banks are registered with the Financial Services Authority (FSA) which runs the Financial Services Compensation Scheme (FSCS).

The FSCS protects the first £50,000 you have in savings, but this is per person, so a joint account would be covered up to £100,000.

However, the protection offered by the FSCS is per institution and not per account so if you have more than £50,000 in one bank it is probably best to split it between several different providers.

Some banks own lots of brands but sometimes only the parent bank has a licence with the FSA and is therefore able to run additional brands, but the brands do not each get the protection under the FSCS – you would only get £50,000 of protection split between the parent bank and its brands.

For example, Nationwide runs savings accounts offered by the brands Cheshire Building Society and Derbyshire Building Society but it only has a single licence with the FSA. This means, f you had £50,000 in Nationwide and £50,000 in Cheshire Building Society only £50,000 in total would be covered and you stand to lose the other £50,000.

In contrast, the Royal Bank of Scotland and NatWest are part of the same group but each has a separate licence with the FSA, so you could have £50,000 in each and be covered for both deposits of £50,000.

Where is my money safest if I have savings worth over £50,000?

There are also some institutions that are owned and run by the Government and so any amount of money you put in these banks will be fully protected. The two Government-run banks in the UK are National Savings and Investments (NS&I) and Northern Rock. Your deposits will also be fully protected in the Bank of Ireland, the Post Office and Bristol & West because the Irish Government have guaranteed all deposits until September 28 2010.

How will I know how much I can put into each bank?

In order to spread your money around, you will first need to know who owns who. At the bottom of this article you will find a document which lists all of the major savings providers and how much can be safely deposited in each. If the ‘Maximum amount protected’ box says ‘£50,000 (in total)’ this means you can only have £50,000 between the banks and not per bank.

If you find you have more than £50,000 per licensed provider, why not compare savings accounts and try to spread your money around?

How much can I put in each bank? (Excel Document 12.5 KB)

10:00 AM | Categories: Money, General Info, Savings Accounts