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By David Stevens Personal Finance Correspondent
Wednesday, 8 October 2008 |
How Safe Are Your Savings, Really?
Small print to watch out for:
- Only the first £50,000 of your savings is guaranteed
- The guarantee applies per institution, not per account (or per bank in some cases)
- Any debts you hold with the same institution as your savings will be deducted from the compensation amount
 Compare Savings Accounts
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YESTERDAY the Financial Service Compensation Scheme increased protection on any of your savings from £33,000 to £50,000, but is this good enough and are your savings really safe?
Follow the points in this quick guide to savings in UK’s current economic Armageddon and you should avoid having to take your money over to Ireland (where there is no upper limit on savings guarantees).
What kind of savings are protected?
Don’t be fooled into thinking every kind of saving is protected – it is not. However, the most popular and obvious forms of savings are safe. These include:
Bank and Building Society Accounts - Your money (well, £50,000 of it) is safe in an UK registered Bank or Building society. You can safely put the money into a savings account, current account or small business account.
Cash ISAs - If you have a cash ISA your money is quite safe. Equally you can safely open a cash ISA to offer yourself both protection and tax-free savings.
Be hyper aware that hamper schemes, Christmas Saving Schemes and savings stamps are not protected. We’d strongly recommend you ditch these schemes and plump straight for a regular savings account or current account with a bank or building society.
You can compare savings accounts or current accounts here.
Will I definitely get all £50,000 back if my bank collapses?
Absolutely, yes.
Some anxious savers are being unduly worried by the old legislation which only paid back the first £2000 and 90% of the remainder.
The Northern Rock fiasco last year altered the government and regulator’s stance on this and now the full 100% of your savings up to the £50,000 limit is guaranteed.
Should I split my savings across institutions?
No, unless you have over £50,000 in savings in which case it could be a prudent move to ensure you only hold a maximum of £50,000 in each institution.
Be cautious of two things though: - The protection applies per institution and not per account, so splitting your savings into two accounts in the same bank or building society will not double your protection.
- If you are splitting your savings across banks or building societies, make sure they are not part of the same institution (eg. HBOS – which comprises Halifax, Bank of Scotland, Birmingham Midshires, Safa and Intelligent Finance – is considered a single institution.)
Any other advice?
Yes, if you hold your savings with the same institution that has issued your mortgage, a loan or even a credit card on which you owe money, you should shift those savings elsewhere.
This is because the compensation scheme rules that if you have any debts with the institution holding your savings, the outstanding amounts will be subtracted from the savings.
This could result in you losing thousands of pounds.
It may be time to compare savings accounts!
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