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Are you sure your savings are safe?


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Safety of savings after bailouts

With the collapse of several big banks, bailouts from the government and the recent dramatic events in Cyprus, there is no wonder some of us are starting to question the safety of our savings. We all probably scoffed at our grandparents keeping wads of cash in the mattress at home because they didn’t trust ‘those banks’, but before you go rushing to hide you cash under the covers, there are ways to ensure your savings are better protected and get the most from your money.

Financial Services Compensation Scheme

Did you know that there is a government Financial Services Compensation Scheme (FSCS) which covers savings up to £85,000 per person in all UK regulated current or savings or ISA accounts held in banks, credit unions or building societies? So if you have a joint account that is £170,000 worth of protection. The protection is based per institution, not per account, so check what counts and how your bank is set up.

Some banks are sister banks under the same umbrella such as NatWest and Ulster which are all under RBS yet offer separate protection, however some are classed as one,  so you only get £85,000 worth of protection in total. In a nutshell, if you have several accounts within the same bank or building society, you would still only be covered for £85,000 where as if you spread your saving into accounts within separate institutions, you would be covered up to £85,000 per person, per account. At present, there are around 10 banks offering good interests rates that are covered by the scheme, so even if you have a large amount of savings, you should be able to spread them evenly and protect the majority, if not all of your money.

UK Regulated banks

Are your savings safe?

You should also ensure that you are saving with a UK Regulated bank or building society. Even though most foreign own banks such as Spanish-owned Santander, are UK regulated, there are a few which operate on a ‘passport scheme’ which means you would rely on protection for their home government, should they go bust.

However banks outside the EU are a different kettle of fish altogether and would offer no protection. It’s probably also worth noting that even though the FSCS is there to protect your savings, it is probably the last course of action taken as if your bank goes bust, they are more likely to be bailed out than declared bust!

Savings and debt

Remember that even if you have both savings and debt with the same institution, these are treated separately in the even your bank goes bust. You would still receive the compensation from the FSCS but still owe the bank the full amount of your debt. Prior to January 2011, your savings were automatically taken from the debt owed, forcing you to lose any savings to offset the debt. However, if you do have substantial savings and debt, it does make more financial sense to pay off any debt first as the interest rates on your debt will always be more than the interest you are making on your savings.

Does the FSCS have enough money?

You are at this point probably asking if the FSCS has enough money to support its savers?  Well there isn’t a big pot of cash sat there waiting for the worst to happen, instead the FSCS imposes a compulsory levy on lenders that are included in the scheme. So for example, it would ask the others banks or building societies to contribute a set level first, allowing the FCSC to control the major institutions and ensure there are available funds to cover the compensation required. After that, if there still wasn’t enough funds available, the government would then lend the money and re-coup the costs from the insolvents banks assets, so you cash should be safe all round.

Still not convinced? Well it’s worth remembering that if you keep your cash hidden at home there is always the risk you lose everything if you are burgled; and if there was a fire? Unfortunately your cash would probably make the best accelerant and you really would be watching your money go up in flames.




About Rebecca Robinson

About Rebecca Robinson

After spending the last 8 years juggling life as a mum of two, wife and working full time as a Project Manager for a global telecommunications company, Rebecca Robinson made the decision to follow her love of writing and took the plunge; turning her passion into a full time career. Since becoming a full time writer, Rebecca has worked with various media and copy-writing companies and with the ability to make any topic relevant and interesting to the reader, now contributes to The Working Parent on articles ranging from credit cards to teenage relationships. Ever the optimist, Rebecca's dreams for the future include a house in the country filled with children, dogs and horses in the field!

Website: Rebecca Robinson

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