Working lives: how to keep your money safe in banks

The recent transfer of ownership of five banks’ savings accounts in the UK has caused fear among many savers. I get many e-mails from listeners and readers as well as friends and colleagues asking “are my savings safe?”

So far, in the UK, yes.

Savings up to £50,000 for each person in each bank or building society or credit union (I shall call them all banks from now on) are covered by the Financial Services Compensation Scheme. That is paid for by other UK banks and is now underwritten by the government. Joint accounts belong to two people so there is £100,000 cover on them. Only 2% of us have more than £50,000 in cash savings so most can sleep easy.

Split accounts

Those who do have more than the limit are splitting their money across several banks. It is difficult to know which banks are truly separate. If you put money in Halifax and in Bank of Scotland, for example, you get just one £50,000 protection. To check linked banks go to: www.moneysavingexpert.com/savings.

Foreign banks are normally covered by the £50,000 limit too. If they are based outside the European Economic Area then they must be authorised here and are covered by the UK scheme and its £50,000 limit. Banks from countries based in the EEA are sometimes covered by our scheme. Others are covered by the scheme in their home country. Any claim is made first to that scheme and payment may be slow and in a foreign currency. The balance up to £50,000 is then paid by the UK scheme. Protection in the EEA is being raised to at least €50,000 (about £40,000) but many countries are raising it to twice that amount.

Full deposit gaurantee

All these limits may be a little academic because the UK government has made it clear that it will guarantee savings up to any amount in a UK bank (Northern Rock, Bradford & Bingley) or a bank that sells accounts in the UK (Icesave, Heritable Bank, Kaupthing Edge).

The Isle of Man, Jersey and Guernsey are separate countries outside the UK and the EEA. They each have their own compensation schemes, which may not be as good or as swift as the UK scheme and they are not underwritten by the UK government. Unless you are an ex-pat and cannot get a UK bank account there is little point in putting money offshore.

Paul Lewis is a freelance writer who presents Money Box on BBC Radio 4