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Spend & Save

Brits should reconsider saving in foreign banks

People are reluctant to put their savings into foreign banks even if they offer more attractive interest rates than their British counterparts, new research from the Financial Services Compensation Scheme (FSCS) has found.

Only 29 per cent of people would choose to a non-UK bank with high rates, while 54 per cent say they would actively avoid them. This contrasts with the run-up to 2007/8, when many people would "chase rates" and put money into foreign-owned banks, such as Icesave.

When the Icelandic banking system collapsed, thousands of UK savers were left out of pocket but were bailed out by the Exchequer. However, the FSCS points out that European banks with UK branches are now protected by the deposit insurance scheme in their home country up to a limit of €100,000 (£82,000).

And it's not just savings accounts where Britons are cautious. Only 36 per cent of people say they would insure their home or car with a cheap provider that they have not heard of before.

Mark Neale, the FSCS's chief executive, said: "This caution is understandable given the events of 2008. There has been a significant improvement in protection for savings and deposits since, yet too few people know this."