Taking care of your savings

With all that has happened in the banking industry over the past year it is little wonder that consumers are so nervous about where to put their hard earned money when it comes to savings accounts. This time last year saw Northern Rock go through its crisis, and many people flocked to withdraw billions of pounds worth of savings from the bank before it was eventually nationalised. Many other building societies and banks benefited from this situation, as consumers tried to find alternative places to put their savings.

However, less than one year later another situation occurred, where HBOS was taken over by Lloyds TSB, prompting many nervous savers to take their money from HBOS due to fears that the deal would collapse. Just a week or two later it was announced that the savings arm of Bradford & Bingley was being bought by Abbey, and the rest of B&B was to be nationalised. And more recently we have seen the collapse of Icelandic banks where many UK consumers, charities, and local authorities, had placed large amounts of money having been attracted by the high rates of interest that were being offered.

With so much going on in the financial sector it is no surprise that consumers are so nervous about what to do with their money. Strangely, many have now turned to Northern Rock to try and find a safe haven for their money, and this is the result of a 100% guarantee that the government provides for Northern Rock savers – something that is usually only offered on National Savings and Investment accounts.

The government has also had to make changes in response to the changes in the banking industry, such as increasing the 100% guarantee to the first £50,000 of savings instead of the first £35,000. Also, consumers that had more than £50,000 in the collapsed Icelandic banks within the UK have been told that they will be getting all of their money back through the UK compensation scheme, as the Icelandic government is not covering these savings.

For many, finding a safe place for their savings has become extremely difficult. Even some financial advisors are apparently unable to offer reliable advice on the best place for savings because the market is changing so much and so rapidly. For those looking for a safe place for their money it is worth remembering that there is a 100% guarantee on Northern Rock and National Savings & Investments. However, Northern Rock has been inundated with new customers recently, and has had to close many of its accounts to new customers.

Another thing to bear in mind is the increased safety net on savings that are in UK branches of Irish banks, which have come about due to recent changes in the Irish banking system. Because Post Office savings accounts are also operated by the Bank of Ireland, these are also covered by the increased guarantee. Therefore those lucky enough to have more than £50,000 to save may want to consider looking at accounts with financial institutions that offer a full guarantee or higher level of guarantee on savings over and above the £50,000 threshold.

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