How to keep your savings safe

Savings accounts

How to keep your savings safe

By Chiara Cavaglieri

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How to keep your savings safe

Follow these five essential steps to safeguard yourself against banks failing and ensure that your savings get the maximum protection possible.

Savings accounts are commonly used for storing long-term funds, but customers' can often be at risk of losing money if their bank collapses. However, there are methods of ensuring your savings are protected should such a scenario unfold.

Here are five essential steps to keeping your savings safe.  

Step 1: Understand where your money is saved

The benefit of cash Isas and savings accounts is that you can open as many as you like, within the rules, across as many providers as you like. 

It's important to keep track of where all your money is saved. You also need to make sure that your money is earning as much interest as possible. 

Which? is here to help. The Which? savings and Isa comparison tables let you search all available savings accounts and Isas from all available providers to choose the best savings rates based on quality of service as well as cost and benefits.

Which? Money Compare table: Savings accounts and Cash Isas - compare hundreds of deals

Step 2: Stay within the FSCS limit

The economic turmoil of the past few years has shown that banks are vulnerable to failure. The Financial Services Compensation Scheme (FSCS) offers a safety net to savers if the risk of your bank going bust becomes a reality.

If you have a savings account with a provider that is authorised by the Financial Conduct Authority (FCA), up to £75,000 of your savings are protected. This harmonises with the rest of Europe, which has set compensation limits to 100,000 euros.

It’s important to remember that this £75,000 coverage is per person per firm. So if you have more than this amount in savings, you should spread it around several financial institutions.

Find out more: How does the FSCS protect me? - learn more about what protection your savings have

Step 3: Find out who owns your bank

The banking landscape is changing regularly – smaller firms are merging with larger competitors in a bid to stay afloat during tough financial times. The past few years have seen the likes of Lloyds TSB take over HBOS, Santander buy Abbey, Bradford & Bingley and Alliance & Leicester and The Co-operative Bank merge with Britannia.

This affects the FSCS coverage that customers would receive in the event of a crisis. Some banks, such as Lloyds and HBOS, have retained their own banking licenses after merging, so you have compensation coverage from both banks. However, others have given up their separate banking licenses - meaning that you may now only have one 'dose' of coverage.

To find out who owns your bank and what FSCS coverage you have in place, see our guide to who owns who in the savings market.

Step 4: Consider a joint savings account

If you and your partner have saved a significant amount of money and you don’t like the idea of spreading it around multiple banks, consider opening up a joint savings account.

The FSCS covers £75,000 of savings per individual, per financial institution - so by placing your savings in a joint savings account along with your partner, you're effectively doubling your coverage. This means coverage of £150,000 in total.

Step 5: Be sure before you go offshore

Putting your money in an offshore savings account might be appealing as they often pay higher rates of interest - but many people had their fingers burned by the collapse of Icelandic bank Icesave in 2007.

Banks in the European Economic Area (EEC), such as the Bank of Cyprus, are covered by their own domestic compensation schemes. The level of compensation that they pay is 100,000 Euros.

Those that are based outside the EEC, such as Indian bank ICICI, have to be authorised by the FCA in order to operate in the UK. This means they are covered by the UK’s FSCS.

  • Last updated: September 2016
  • Updated by: Chiara Cavaglieri