Did you know that the compensation limit for UK savings accounts changed on 1st January?

If not, you are not alone.  Recent research has found that only around half of UK consumers knew that the limit changed on 1st January, 2011 to provide increased protection for the holders of the top savings accounts.

Banking compensation limit rose on 1st January

Before 2011, the Financial Services Compensation Scheme (FSCS) offered UK consumers protection for the first £50,000 of their savings (£100,000 for joint accounts) in the event of a bank collapse.  However, in line with other European countries, the limit was raised on 1st January 2011 to €100,000 (around £85,000).  The limit is doubled for joint accounts.

This amount will be fixed for the next five years.

UK consumers unaware of change

Even though the limit has only recently been raised, a recent poll found that less than half of UK consumers were aware of the change.  52.2% of those surveyed knew the current compensation limit but were unaware of the change.

We at compareandsave.com welcome the decision to raise the level of compensation payable under the Financial Service Compensation Scheme.  We believe that this will give additional confidence to savers who, thanks to low interest rates and concerns over the stability of financial institutions, have had a rough time over recent years.

Make sure you protect your cash

To maximise your protection, when you compare savings accounts to find the top savings accounts, you should make sure that you spread your cash between banks.

While the compensation limit was raised in January in line with EU legislation, you should remember that the limit is ‘per institution’.  With many takeovers and mergers having taken place in the last few years, it is vital that you make sure you maximise your protection by picking the best savings accounts from different providers.  For example, Santander now incorporates Abbey, Alliance and Leicester and Bradford and Bingley; all popular places that savers have previously invested their cash.

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Savings accounts in one form or another have been around since antiquity. The Monte dei Paschi di Siena, located in Italy, is the oldest bank that is still in existence, having been operating since 1472! Banking as we know it can be traced to Italy during the late medieval and early Renaissance times. However, concepts such as storage of commodities and letters of credit can be traced back as far as the third century CE.

Banks administer checking and savings accounts for individuals, pay cheques drawn on the bank, and collect money and cheques deposited to current accounts. They also lend money to qualifying customers for purchases such as cars and homes.

While many Brits flocked to safe savings accounts after the 2007 collapse of Northern Rock and the 2008 collapse of Bradford & Bingley, they have been steadily withdrawing money from savings in the years since. Experts suggest that money taken out of savings is being used to pay off mortgages and other debts now that interest rates on savings are very low.

But savings accounts are poised to remain popular for the indefinite future, both as a hedge against inflation and as a safe haven for funds, particularly as individual investors are more sceptical about higher risk investments due to the worldwide economic slump that began in 2008.

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By the end of January 2010 Spanish bank Santander should complete its re-branding of all 1,000 Abbey and Bradford & Bingley branches. Santander will then move to re-brand all 278 branches of Alliance & Leicester later in the year.

The end result will see Santander become the fifth-largest bank in the UK with 1,300 outlets.

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