The safest places to keep your savings

Don't even think about stashing your cash under the mattress – there are better alternatives. James Daley reports

Just when you thought the worst of it might be over, the banking crisis plumbed even greater depths this week – with UK savers' money put at risk for the first time since the crunch started. Although the Government eventually came to their rescue, customers with money in Icesave, Heritable and Kaupthing Edge were denied access to their savings, and some will have to wait months before they can get their hands on it again. (To get up-to-date information on the situation, visit the Financial Services Compensation Scheme's website at www.fscs.org.uk.)

A few months ago, the events of this week would have seemed improbable. So is your money safe anywhere but under the mattress these days? Here are five of the best places to keep your money – and have peace of mind.



HSBC

Of the UK-owned banks, the only one so far to survive the credit crunch relatively unscathed is HSBC. While most banking shares are down at least two-thirds since last August, investors in HSBC have actually made money over that period, when you take into account the dividends.

Better still, some of its savings rates are extremely competitive. Its cash ISA, paying 6.25 per cent, is one of the top five on the market – although you will need an HSBC current account to qualify. Meanwhile, its online saver is not too bad – paying 5.25 per cent. Beware, however, that you will lose more than half of this interest in any month where you make a withdrawal.



ABBEY / ALLIANCE & LEICESTER / BRADFORD & BINGLEY

Abbey, which is owned by the Spanish banking giant Banco Santander, has also established itself as one of the safe havens for investors over the past few months – and its move to buy up Alliance & Leicester, and Bradford & Bingley's savings business, showed its financial strength. If you bank with any of these three institutions, you should be able to sleep easy, knowing that your money is being looked after by one of the largest banks in Europe.

Its rates are good, too. Bradford & Bingley is offering an instant-access account paying an impressive 6.51 per cent. And Alliance & Leicester is offering 6.6 per cent, although the rate reduces if you make a withdrawal. One thing you need to watch out for is that many of Abbey, B&B's and A&L's accounts come with first-year bonuses, after which the rates drop back down. By then, however, there's a good chance that the worst of the banking crisis will be over, allowing you to move your money elsewhere if you wish.

Although Abbey, A&L and B&B are owned by a Spanish bank, they have UK banking licences, so are covered by the UK FSCS. Abbey and A&L have separate licences, so you could have £50,000 in each of these and still have 100 per cent protection. But B&B and Abbey operate under the same licence. Still, the chances of this behemoth going to the wall are very small indeed.



NORTHERN ROCK / NATIONAL SAVINGS

Northern Rock and National Savings & Investments are both owned by the British Government, and are the only places that have the state's full and official backing. Having said that, they no longer offer the competitive savings rates they once did.

When the Government nationalised Northern Rock, it promised not to let it build up more than a 1.5 per cent share in the savings market. At the end of last month, it came close to that limit, so lowered its rates to stop attracting so much money.

With inflation still high, getting a good return on your savings is more important now than at any time in the past 10 years. If you stick with the Rock or NS&I, your savings probably won't keep pace with inflation once tax has been taken into account.



GOLD

If you feel like you're done with working out which banks you can trust, you could take a look at gold, or other precious metals. The only problem is, investing in metals is far from risk-free, as they are freely traded on open markets, and their price can fluctuate quite wildly. Still, over the past three years, the price of gold has doubled to around $900 (£520) an ounce, and in these uncertain times, it continues to be a popular home for people's money. The advantage of gold over other options is that, if you want, you can exchange your savings for a physical object. If financial Armageddon ever came about, even the bank notes in your pocket might not be worth much. Gold, however, is a universal currency, which is likely to retain a high value as long as times remain uncertain.

The World Gold Council's website ( www.gold.org) has links to a number of gold retailers, where you can buy bars and coins. Many of them also sell silver and other precious metals.

Having said all this, we wouldn't recommend that you convert your savings into gold or any other kind of metal. It's inconceivable that Britain – the world's fifth-largest economy – will go bust. And given that the Government has made it clear that they will protect all individuals' deposits with UK banks, we think you'd be much better trusting your cash to HSBC, Abbey or NS&I.

Irish banks: Tempting the British

The Irish government caused a stir last week when it announced it would be backing deposits in each of the six largest Irish banks. With the British Government unwilling to match such a promise, many UK savers began to switch their savings to the Irish banks – most of which have branches and operations in the UK.

Many commentators were quick to point out that the Irish government could never keep such a promise. However, the more money that pours into its banks, the less likely it'll ever have to.

With tempting offers available, it's hard to discourage UK savers from taking a look. Anglo-Irish bank, for example, is paying more than 7 per cent on its one-year bonds. However, the more money that is shifted off UK shores, the harder it gets for our own banks.

If you've got your money with any of the big UK high street banks, you should comfort yourself that they're simply too big to fail, and sit tight.

Three to avoid: Savings pitfalls

Too much in one place

So far, the Government has ensured that no depositor has lost any of their savings. However, the Financial Services Compensation Scheme still only officially covers you up to the first £50,000 of savings with each bank or building society. There is something to be said for ensuring you don't have any more than £50,000 with one institution (except the largest, or Government-owned ones). And find out who owns your bank. Some groups own multiple banks and only hold one licence, so only the first £50,000 of your money across all of those banks will be covered.

Small organisations

If you need access at short notice, avoid the smaller banks and building societies. During the summer, Nationwide came to the rescue of the Cheshire & Derbyshire building societies, and this week, Chelsea Building Society saw its credit rating downgraded. Although your money should be safe, even if your building society collapses, you'll probably have to reclaim it from the FSCS, and this could take several weeks.



Overseas banks

All overseas banks operating in the UK are members of a depositors' protection scheme. However, as events this week proved, these are often only as strong as the country's economy. So while Icesave depositors should have been protected by the Icelandic depositors' protection scheme, it soon became clear that the Icelandic government may not have enough money to keep its protection scheme solvent. The UK government eventually guaranteed that all retail Icesave customers would get their money back – and would probably do so again if the events were repeated elsewhere – but, again, this could take weeks. If you think you may not be able to wait that long, you should keep your money somewhere safer.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
    Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

    UK's Major Tum to blast off on a spice odyssey

    Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
    John Harrison's 'longitude' clock sets new record - 300 years on

    ‘Longitude’ clock sets new record - 300 years on

    Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
    Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

    Let the propaganda wars begin - again

    'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
    Why Japan's incredible long-distance runners will never win the London Marathon

    Japan's incredible long-distance runners

    Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
    Why does Tom Drury remain the greatest writer you've never heard of?

    Tom Drury: The quiet American

    His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
    You should judge a person by how they peel a potato

    You should judge a person by how they peel a potato

    Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
    Beige is back: The drab car colours of the 1970s are proving popular again

    Beige to the future

    Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
    Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

    Bill Granger cooks with fresh cheeses

    More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
    Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

    Shay Given: 'This FA Cup run has been wonderful'

    The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
    Timeless drama of Championship race in league of its own - Michael Calvin

    Michael Calvin's Last Word

    Timeless drama of Championship race in league of its own