Guide to Saving Security

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What is savings security?

With hardly a day passing without a bank and building society collapsing or being forced to merge, savers are understandly concerned about the security of their savings. Many people will have been shocked to find that only the first £50,000 of their savings (per authorised Institution) is protected by the Government's Financial Services Compensation Scheme (click here). Prior to October 2008, it was only £33,700. But the protection is only per authorised institution, not per brand, unless the brand is separately authorised by the FSA.

For instance, following the merger of Lloyds TSB and HBOS in January 2009 to form Lloyds Banking Group, the two groups have maintained their separate FSA authorisations.

But remember that HBOS’s authorisation continues to consist of six brands - Bank of Scotland, the AA, Birmingham Midshires, Halifax, Intelligent Finance and Saga (see table below).

This means that if you have £50,000 saved in each of these institutions, you would only be covered for £50,000 in total, not £300,000, so it is advisable to spread your money around to protect your hard-earned cash.

Similarly, Royal Bank of Scotland and Natwest have maintained separate authorizations.

Abbey, Alliance & Leicester and Bradford & Bingley

Banco Santander has umbrella authorisation for the Abbey, ASDA, Bradford & Bingley and Cahoot brands, but a separate one for its private bank, Cater Allen.

Nationwide/Derbyshire BS/Cheshire BS

Nationwide acquired Derbyshire and Cheshire. Your level of protection depends on when you first put savings into any of these societies.

Prior to either date (1 Dec 08 for Derbyshire BS and 5 Dec 08 for Cheshire BS), if you had savings in both institutions, then you will retain separate protection of £50,000 in each (a total of £100,000) until 30 September 2009, and if you had savings in all three building societies before December 2008, you'll keep a total cover limit of £150,000 until September 2009, when the FSA hopes to have a longer-term solution in place.

The Co-op & Britannia BS

These two mutuals are due to merge by July 2009.. However, they will use the same temporary FSA measure as Nationwide, and maintain separate protection for existing savers until 30 September 2009.So, if you currently have savings in both Co-op and Britannia, or start saving with both of them prior to the final merger date, you will have £50,000 worth of protection in both (£100,000 in total) until the end of September.

Skipton/Scarborough BS

Skipton building society took over Scarborough building society and prior to the deal being finalised in February 2009, savers will continue to benefit from two lots of £50k cover. No decision has been taken on what happens after that, so keep an eye open for news on this front. .

Barnsley/Yorkshire BS

Yorkshire merged with Barnsley building society at the end of 2008. For the time being, the two have kept separate authorisations, so £50,000 cover for each.

You can check out authorisation of any UK-authorised financial institution, by visiting the FSA's website.Click here

Foreign-owned banks

Foreign banks which take deposits in the UK may be registered her, but are covered by their home country's compensation scheme, in the event of insolvency. Check the table below, or the FSA website for details.

Irish banks

The Irish government guaranteed the savings of its three major banks  - Allied Irish Bank, Bank of Ireland and Anglo Irish Bank -  up to 100 percent, including those of non-Irish depositors. However, savers may prefer to stick to institutions covered by the FSCS.

In January 2009, the Irish government nationalised Anglo Irish Bank, so depositors are 100 per cent protected.

Icelandic banks

Savings accounts offered by the three Icelandic banks- Kaupthing, Glitnir and Landsbanki - which collapsed in September 2008, were supposed to be protected by the Icelandic government up to €20,887 (about £16,000) but in the event, the Icelandic compensation scheme was found to have no money in it and the UK government had to step in and protect UK depositors' savings. Individuals with Icesave accounts in the UK should receive all their money back during November 2008. The position for people with money in Kaupthing Singer & Friedlander's Isle of Man arm will not be clarified until 27 November 2008 at the earliest. (see Crown Dependancies)

Dutch banks

ING Direct, which took over responsibility for the UK-based accounts of Kaupthing Edge and Heritable bank, offers compensation to savers via the Netherlands Depositors' Compensation Scheme up to €100,000 (about £77,000).

Crown dependencies

The Isle of Man of Man government has recently raised the maximum protection for retail savers under its depositors' compensation scheme from £15,000 to £50,000.

Guernsey

Guernsey has no depositors' compensation scheme and has ruled out state funding to compensate more than 2,000 savers in the Channel Islands' subsidiary of Landsbanki.

Total security

If you want an account which is totally secure, there is little that can beat National Savings & Investments, Northern Rock and Bradford & Bingley as these are all backed 100 per cent by the Government. However, these institutions do not currently pay the highest rates of return, so there is clearly a price to pay for a copper-bottomed guarantee.

Last updated 30 January 2009