People are abandoning savings accounts with banks that are based overseas, opting instead to keep their money in British banks that are covered by the Financial Services Compensation Scheme.
People are very aware of the risk of losing their cash if a bank goes under, something that they previously did not worry about. Since the start of the financial crisis and the problems that have happened with the Icelandic banking sector, many Britons feel that they’d be much better off with their money covered by the British protection schemes even if they offer lower savings rates.
Under the British scheme, up to £85,000 of savings are covered per bank, but it can be difficult to know whether different high street branches will count as different banks due to the ownership of the companies at the top. For joint savers, this limit rises to £170,000, and that’s all money that the government will pay you back.
Michael Ossei, a personal finance inspector, explains why consumers worry about these schemes, but also points out why research is important: “With the Icelandic banking crisis still fresh in many savers minds, it’s hardly surprising so many have concerns about putting their savings with an overseas bank. If you do bank or save with a foreign owned bank, the most important thing is to find out if your savings are protected by the FSCS. If they aren’t that doesn’t necessarily mean your savings aren’t protected. It could just mean that your savings are covered by a foreign government run scheme instead.”
For anybody looking for the best savings rates, this gives them yet another thing to consider whilst shopping around. Once you do decide on a bank, it is also worth keeping up to date on any policy changes in their country’s financial protection schemes, as they could affect you and are unlikely to hit the headlines of the UK media.