Are our savings safe?

Jaybeef

This is my first attempt to join a forum. Apologies if I'm in the wrong area.

Following my recent retirement we find we have money spread in five accounts all with the Halifax. At the moment we are quite happy to continue doing this with the Halifax. My understanding is that if the Halifax goes bust the maximum we would get back is £31,500.00. This amount is less than what we have in savings with them.
Should I be worried about the Halifax going bust?
Should we move some of our savings to another Bank / Building Society and keep the maximum below £31,500.00.

Grateful for thoughts about this issue.

kenshaz

I would not worry,because the Halifax would never go bust,some-one would take them over first,sleep tight you have more chance of winning the the lottery than them going bust,I would look for better interest rates though.

dunstonh

Also, if HBOS went bust, we would have more to worry about than just your savings.

deemy2006

Long before halifax went bust you would have much bigger problems to worry about

Caped_Avenger

If i were you, i really wouldn't worry about Halifax (well, HBOS now) going bust.

Either way, there's a popular misconception about the Financial Services Compensation Scheme (which would step in to deal with your losses if your bank were to go bust).

It actually would only fully repay the first £2000 that you had with the bank. It would then repay 90% of the next £33000. So if you had £35000 you would receive £31700 compenastion, and you'd still lose £3300. Anything above the £35000 would just be lost.

So, strictly speaking, you can only hold £2000 with any one bank "safely" under this protection.

Either way, i wouldn't lose any sleep over it.

Dagobert

Would you worry about building societies (Derbyshire, Leek United, etc.)?

I wouldn't entrust ICICI with more than 35K, that's for sure.

j-baby-scotland

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Stonk

Dagobert wrote:

I entrusted ICICI with a couple of hundred and they made a complete dog's dinner with it. So now I don't entrust them with a penny!

The story about the Cornish chap is very relevant. Big collapses *do* happen. Rarely, very very rarely indeed, yes - but I for one would not stake my life's savings on it not happening. For the teeny extra effort and small cost of splitting the money up among different institutions, I would rather have the peace of mind.

People who say things like "it's so big it will never go bust" are burying their heads in the sand. It almost certainly won't happen, but you *need* to envisage the possibility.

Enron was the biggest energy company in the world.

Tim_L

BCCI went bust because it was running fraudulently, and so was Enron. BCCI wasn't regulated in the UK as I recall.

As a large and competently run bank HBOS is as close to zero risk as you can get, and its accounts are under close scrutiny - if it were to collapse then it would be as a result of something absolutely cataclysmic happening which as others have noted would probably have already caused serious problems.

It's not really a question of sticking heads in the sand, but more to do with a realistic assessment of risk - saying that all apples are inherently risky because someone once bought a couple of bad oranges is a logical non-sequitur and relying on anecdotal evidence only. If you base all your decisions on things that have happened at some point to someone, you will never go out for fear of being swept away by a hurricane or struck by lightning.

Personally I wouldn't put much money into HBOS because their rates are dreadful, but if they had a wonderful deal I'd be happy enough to 'risk' more than the compensation threshold.

Cook_County

We have been extremely lucky that we have escaped a major UK bank collapsing since before the War. In the 1970s and 1980s dozens of American Savings & Loans went under (the closest thing the Americans have to building societies). More recently several Japanese banks went bust following the Asian banking crisis around 10 years ago.

If the UK goes into recession again a UK bank will collaspse. Around 3 years the rumours were that Abbey plc would go down because of poor commercial banking performance. Luckily they were purchased by Grupo Santander before this happened.

Right now the risk is low because another bank would step in (as happened with Barings) but that is no guarantee for the future.

The UK investors protection scheme is better than nothing and combined with recent stock market performance makes the issue very low risk. But...IMHO the tide could quickly turn.

Never keep all your eggs in one basket!

Stonk

Agreed.

(a) It does not necessarily require fraud to bring down a company. It certainly helps though.

(b) Anyway, nobody knows until too late that massive fraud is going on. Obviously nobody suspected Enron was doing it. A couple of months before they crashed disastrously, one would have said exactly the same thing - that they were being run competently. Hindsight is a marvellous thing.

The best-paying accounts are so close to one another anyway, that the cost (in reduced interest) of splitting up your money among them is non-zero but minimal. This cost represents the insurance premium for peace of mind. I pay that premium. But, as for any insurance, it is an individual decision that should be based on consideration of the extent to which you would be disadvantaged by the possible loss, balanced by the price of the premium and the probability of the loss happening. E.g., I don't pay £100 for 5 years' insurance when buying a £250 washing machine because if it dies 5 years down the line (which is a fair possibility), it won't be a hardship for me to buy a new one. But losing my entire life's savings (minus £31K) would absolutely gut me, so I'm not prepared to risk that at any probability; not 1%, or 0.1%, or 0.00001%. Everybody will have their own position on the insurance scale depending on their personal circumstances.