Savings safety net

You can save safely with Banks and Building Societies because of the UK governments savings safety net.

All British savers have the first £85,000 of cash protected in the event of their bank or building society going bust from the 1 January 2011.

This £85,000 limit is applied ‘per individual, per bank’, so if you have more money than this to make sure your savings are government backed put any cash that you have more than the £85,000 limit in to another bank or building society. Remember that joint account customers can get up to £170,000 refunded if their bank fails.

The savings compensation was brought in after the banking financial crisis a few years ago and basically means that If you’re bank or building society hits the walls you are protected. This means that savers can claim back up to £85,000 back from the Financial Services Compensation Scheme (FSCS) – £170,000 for a joint account.

The £85k and £170k (joint account) limits do not apply to money held with National Savings & Investments, where all of your money is 100% guaranteed by the Government.

As Building societies are mutuals, where each member is effectively a shareholder,  all building societies are independently governed by their own boards and cannot be owned by another institution. So each of the nation’s building societies will be separately covered by the FSCS up to £85,000 for each member.

Building societies will tend to support each other if the worst happens and their self-protecting outlook means another society is likely to step in and merge with another that may be in trouble.

Will our kids get into more debt?

Cash MoneyA third of parents believe their children will be less equipped in the future to deal with their finances than they are.

Despite the credit crunch and the focus on finances, the nation’s parents admit they are worried about whether the next generation will be able to manage their own money, research from M&S Money has revealed.

It shows that a quarter of parents are fearful, despite the more cautious financial environment we’re now in and that it will still be easier for their kids to get into debt than it was for them.

A third think their children will be less able to manage their money than they are.

Almost one in five say their children will be ill equipped to understand and deal with their own finances, as there is simply too much jargon to wade through and not enough practical guidance in schools.

Despite this, almost a third of parents believe that imparting their own experiences can help children learn and improve future financial challenges.

They are confident that by being more open than their own parents were with them and integrating finance into the school syllabus, their children are more likely to be able to cope with future personal finance challenges.

A fifth of today’s parents said their mothers or fathers had the most influence over how they manage their own personal finances.

Colin Kersley, chief executive of M&S Money, said: ‘Having been through one of the most complicated couple of years for family finances the importance of getting things right for the future has never been more important.

‘Too many of today’s parents are not yet confident about the nation’s efforts to improve financial awareness and ability for the next generation.

‘Providing practical guidance in schools as well as offering simple and transparent products is really important.

‘The goal that our children will be more able to handle their own finances is worthwhile and one that industry, consumers and Government must work on together.’
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Are Self-service Bank paying in machines safe?

Do you worry about paying your cash into a self service machine?  Well maybe you should be !!

A legal loophole is leaving bank customers who use self-service paying-in machines at risk, experts warn.  The machines, which require customers to post cash using an envelope, do not issue receipts – meaning there is no legal right to demand it back if the cash goes missing.  Hundreds of people a year are denied compensation by their bank after claiming they have lost money deposited in their account this way, says the Financial Ombudsman Service.

If cash is lost or stolen when staff members count it at the end of the day, the bank can deny it ever existed since there is no evidence of how much was paid in.  According to the Financial Services Authority (FSA), customers have little legal protection if their money goes missing and the acknowledgment slip is the only proof they have.

James Daley, editor of Which? Money, adds: ‘If banks are not willing to provide a guarantee, then they should be putting signs up at the machine warning customers.’  Customers who lose their money in this way can complain to the Financial Ombudsman Service, but only half of all complaints it received last year were upheld.

All six of the banking groups have introduced new machines which count the cash and provide proper receipts, but not all branches have them.

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Child Trust Funds – Viable Savings Alternatives

Now that the new government has announced the demise of the state supported Child Trust Fund (CTF), what are the alternatives for parents who are still keen to put cash away for their little ones?

Previously awarding each and every child in the UK two vouchers of £250, CTF payments will be reduced as from August and be completely axed at the end of the year – but if you’re locking away money for 15-20 years there are loads of viable options still available on the market.

Offshore Personal Savings

Easy access and fixed term offshore savings accounts generally offer low or tax free conditions, easy access and higher rates of interest. The later generally offering a better rate of return for the saver – perfect for long term investments.

Children’s Products

There are a few high street lenders in the market who offer products aimed specifically at investments for children. These are great because they tend to deliver on key areas such as control and beneficiary, but if the investment is intended to be long term, any saver would do well to compare returns, terms and conditions with other non-child packaged products on the market.


These fall under bare, unit and investment trusts, all of which are opened in a trustee’s name on behalf of the child. Unit trusts are a type of ‘pooled investment’ – a fund manager buys shares in a range of different companies and pools these in a fund; you then buy ‘units’ in the fund. Investment trusts invest in the shares of different companies, allowing investors to spread their risk. The main difference from unit trusts is that investment trusts are themselves companies in which you buy shares. Unlike unit and investment, the trustee’s of bare trusts are simply nominees and must act according to the beneficiary’s instructions.


A long term investment ISA is a great option if you’re planning to lock money away for a long period, and despite recent watchdog revelations in the media about low paying ISA’s, there are still a few choice products on the market that offer up to 5% return – plus they’re tax free. If you want to play with your money, cash ISA’s offer excellent tax-free annual returns.

National Savings & Investments

Backed by the HM Treasury, National Savings and Investments (NS&I) are one of the largest savings and investment providers in the UK and offer 100% security. Alongside Premium Bonds, NS&I offer a variety of products, including index-linked and fixed-interest savings certificates, children’s bonus bonds, direct ISA and investment accounts.

Bank’s Savings Compensation Scheme

piggybankFollowing the collapse of the Icelandic banks Kaupthing and Landsbanki, the Government raised the amount of savings protection for individual savers from £35,000 to £50,000 in October last year, which would be paid through the Financial Services Compensation Scheme (FSCS).

Instability has racked the UK banking industry since September 2007 with the nationalisation of Northern Rock, part-nationalisation of Lloyds Banking Group (including HBOS) and RBS, the collapse of Bradford & Bingley and the bailout of Alliance & Leicester by Spanish bank Santander.

Maximum compensation limits (and how to make the most of it)

All of your savings are covered up to £50,000 by the FSCS as long as they are not all held with the same savings compensation licence (see link at the top of the page). The limit on joint accounts is £100,000. These limits do not apply to money held with National Savings & Investments or Northern Rock where all of your money is 100% guaranteed by the Government.

Foreign banks compensation limits

These limits do not apply if your bank is a foreign bank operating in the UK with a higher compensation limit in its home country. For example, as of September 2008, the deposits of the Post Office and Irish banks operating in the UK such as Anglo-Irish Bank, Allied Irish Bank and Bank of Ireland, are 100% covered following an increase in compensation from the Irish government.

Essential advice: spread your savings

Due to the rule on different savings accounts with one provider, it is best to spread your savings over as many savings institutions as possible. Yet a series of mergers, takeovers, joint ventures and subsidiaries has created a confusing web for savers to negotiate. And this would have huge implications were your savings provider to go bust. If you had three accounts with the same banking group – which does not have separate compensation licences for each of its brands – instead of getting three compensation claims of £50,000, totalling £150,000, you would only get back £50,000. However, if the bank is separately authorised by the Financial Services Authority then you would get a separate compensation limit.