Savings account Guides

Safe savings – is my cash protected?

Updated: Tuesday 14 June, 2011

By Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

When deciding where to put your savings, how do you know which banks are safe and where your money is protected?

Once upon a time, the chance of a bank collapsing seemed so unlikely that it wasn’t even worth considering when comparing accounts. However, since the credit crunch hit we have seen several banks bailed out and the safety of our money has become a major concern.

There’s no need for great panic though, because as long as your money is in a UK bank or building society regulated by the Financial Services Authority, it’s covered by the Financial Services Compensation Scheme (FSCS). To ensure all your cash is protected, there’s only one rule to follow:

Don’t save more than £85,000 with each financial institution

A fairly straightforward rule, but for those of you lucky enough to have more than £85,000 in savings, it’s definitely worth looking into what counts as a financial institution.

For joint accounts the FSCS protects up to £170,000.

The key point to remember is that the £85,000 limit covers the financial group as a whole, not the individual banks within it.

The notable exception is Lloyds Banking Group, as Lloyds TSB and HBOS are considered separately under the FSCS as they have separate banking licences.

As the £85,000 limit includes all assets in all accounts in all brands of a single banking group, it’s imperative to check which financial organisations are grouped together under this scheme. Here is an at-a-glance guide:

• HSBC, First Direct, Marks & Spencer Financial Services
• Royal Bank of Scotland, Direct Line (savings only), The One Account, Nat West, Coutts
• Lloyds TSB, Cheltenham & Gloucester
• Santander, Cahoot, Alliance & Leicester
• Nationwide, Cheshire BS, Derbyshire BS, Dunfermline BS
• Bank of Scotland, Halifax, Capital Bank, Intelligent Finance, Saga
• Co-operative Bank, Britannia, smile
• Yorkshire BS, Barnsley BS
• Clydesdale Bank, Yorkshire Bank (both are UK divisions of National Australia Group)

To see which banking licences supermarkets operate under, see our expert's advice on supermarket savings accounts.

In you have more than £85,000 in savings you should ensure it is split between these groups, otherwise you may find your money is not protected by the FSCS.

For example, if you save £50,000 with HSBC and £50,000 with First Direct you are only covered for the first £850,000 of the combined £100,000 total in the event of a bank collapse, so you’d lose £15,000 if anything went wrong.

So, for safe savings, remember to spread your cash about.

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