Foreign firms show the way on savings

"Buy British", the old shopping adage goes. But when the best deals are on offer from overseas rivals, it's hard to be patriotic - and the UK savings market is no different.

There are now nine foreign providers offering competitively priced accounts - many of which are giving our banks a real run for their money, according to the price-comparison service Moneysupermarket.com.

The revolution began three years ago when Dutch bank ING Direct launched an account on these shores - shaking up the cosy old status quo enjoyed by our banks and building societies. Since then, more and more foreign financial firms have come to the UK and found their way straight into the "best buy" tables.

At present, the "easy access" savings table is topped by the HiSave account from ICICI, an Indian bank, and the Icesave account from Landsbanki of Iceland.

"These two providers are paying a pretty good rate of 5.45 per cent," says Sue Hannums at independent financial adviser (IFA) AWD Chase de Vere. "This is especially true for Landsbanki, which has a three-year guarantee to pay at least a quarter point more than the Bank of England base rate [currently 5 per cent] until October 2009, and then at least base rate for the next two years. This knocks the socks off its competitors."

Earlier this year, there were "momentary periods" when the easy-access tables were topped by home-grown providers such as Birmingham Midshires (BM) and Alliance & Leicester, says Stuart Glendinning at Moneysupermarket.com. But their reign was short-lived: "ICICI has had the top rate for much of the year."

He adds: "This is a foreign invasion that everyone with money to save can welcome."

While some savers may feel uneasy about squirrelling away their money with a provider they've never heard of, there are steps they can take to protect themselves.

"The main thing is to check the bank is regulated by the Financial Services Authority and that it participates in the Financial Services Compensation Scheme," says Mr Glendinning. "That way, in the event of a financial collapse, you are guaranteed a 100 per cent refund of the first £2,000 and 90 per cent of the next £33,000."

Further, he points out that foreign providers have also been leading the way in notice accounts and fixed-term bonds. Turkish Bank currently has a market-leading rate of 5.57 per cent on its 60-day notice account, if you have an investment of at least £1,000.