How safe is your cash in a Spanish bank

Sapspec_2

I'm not looking for a financial advisor, but it seems the days of considering banks to be 'safe' are well over.
In particular the Ireland/Portugal/Spain(?) domino effect.
I retired about 8 years ago on a very insufficient pension, & I rely on the monthly interest from my savings as an income supplement...
My current fixed rate account ends this month & I intend to stay with Santander:( & I have a choice - 2.75% instant access, or a fixed rate (3.55%) 2 year bond...
Anyone with a crystal ball out there?
Any good advice thoroughly appreciated.
Thanks for reading, ---- Stan

middlepuss

How much have you got in the account? And which Spanish bank?

opinions4u

middlepuss wrote: »

which Spanish bank?

The post states Santander.

OP, I assume you are in Britain?

Read the article on the main site about "Are My Savings Safe?" for starters and take it from there.

Why limit yourself to Santander?

middlepuss

opinions4u wrote: »

The post states Santander.

Oops, so it does!

Sapspec_2

Folks:
Thanks for your interest...
Yes, I am in Britain. The sums involved should attract the higher rates.
To elaborate - I intend to stay with Santander because:
1) Switching the cash to another account within the bank there is no 'lost in cyberspace' delay & subsequent loss of interest if I go elsewhere.
2) I have had NO bad customer relations with the bank (regardless of bad reports)
3) The rates offered are close to market leaders anyway.
HOWEVER --- my main causes for concern is the current instability of both the banks in general and Spain/Portugal in particular, but if I can be reassured on these points, I still need to chose whether to tie for 2 years at a higher rate.
OR accept the instant access lower rate and be able to cut & run at any sign of trouble (which I have already experienced 2 years ago in Iceland!), with the added advantage that I would be able to switch if interest rates rise.
OR (2) Am I even in the correct product for my circumstances?
PS My wife is under the allowance tax free - I am not & we each have a similar amount in seperate accounts with the bank.

Your further comments appreciated
Stan

Reaper

Sapspec wrote: »

HOWEVER --- my main causes for concern is the current instability of both the banks in general and Spain/Portugal in particular

How much money are you talking about? The UK compensation scheme will protect your first £50,000 of savings and that figure will go up to £85,000 on the 31st December. That's each so if it is split between you and your wife you each get that allowance. And it does apply to Santandar even though they are a Spanish bank.

PS My wife is under the allowance tax free - I am not & we each have a similar amount in seperate accounts with the bank.

Assuming you trust your wife not to run off with the money gift it all to her. As long as the amount of interest it earns does not take her into a tax bracket you will get all the interest tax free. Be sure to tell the bank who will give you a form to fill in then tax will stop being deducted.

Loughton_Monkey

Sapspec wrote: »

HOWEVER --- my main causes for concern is the current instability of both the banks in general and Spain/Portugal in particular, but if I can be reassured on these points, I still need to chose whether to tie for 2 years at a higher rate.

You basically have two choices.

Either you accept, like the majority of the country, that there is enough recent experience that stops them going bust and/or compensates of they do.

Or, you put it under your mattress.

It's up to you.

nilrem_2

Sapspec wrote: »

I'm not looking for a financial advisor, but it seems the days of considering banks to be 'safe' are well over.

Stan Banks in the UK are safe contrary to all the scare stories one hears, no UK government will let any UK bank or building society go bust if it meant UK savers losing their cash because if they did the consequences of doing so would lead to total anarchy.

If just one UK bank or building society were to be allowed to fail with savers losing their cash then every bank and building society in the UK would have queues of customers outside panicking to draw out their cash, so much so that there would not be enough cash to go around and all banks would fail causing the value of cash to be practically worthless! Don't look to the FSCS to help because they do not have enough money to compensate every one if all banks failed.

It just will not happen, even banks such as those run by Santander will be protected IMHO, because too many people in the UK save with them also look at the Icesave failure for evidence of government intent.

IMHO people need to stop worrying about bank failures because if it gets to that stage cash will be worthless and you will be better off with a shed full of cans of baked beans or other foodstuff!

Sapspec_2

Folks:
Thank you indeed for your excellent comments, I'm totally convinced to stay with Santander. I didn't know about the compensation scheme rising to £85k so I will split the dosh 80/20 with the larger part to my wife, that should take care of her personal allowance.
If I may beg your advice on the other vexed subject --- Instant access @ 2.75% or 2 year bond @ 3.55%?
How’s your crystal balls?
Thanks again guys
Stan

nilrem_2

Sapspec wrote: »

If I may beg your advice on the other vexed subject --- Instant access @ 2.75% or 2 year bond @ 3.55%?
How’s your crystal balls?

Stan, Most crystal balls stopped working around 2007! It depends on whether you need the cash or not quickly, obviously fixed rate will give you more interest and 3.55% is about the norm ATM for a 2 yr fix, rates are almost certain to rise in the near future but no one can be certain when, given that I believe that 2 years is about the longest that one should fix for, indeed I have just reinvested a fairly large sum in a 2yr fix with nationwide.

Why not split the cash up and put a largish percentage on a 2 yr fix and a smaller amount in Instant access in case you need some quickly? You could opt for monthly interest on the fixed rate account and have it added to your instant access account for a regular, quite often the AER for monthly interest is almost the same rate as annual interest income, it gives the advantage of having some money for everyday spending plus you get that feel good factor of seeing the interest added to your income each month.

Loughton_Monkey

Sapspec wrote: »

Folks:
Thank you indeed for your excellent comments, I'm totally convinced to stay with Santander. I didn't know about the compensation scheme rising to £85k so I will split the dosh 80/20 with the larger part to my wife, that should take care of her personal allowance.
If I may beg your advice on the other vexed subject --- Instant access @ 2.75% or 2 year bond @ 3.55%?
How’s your crystal balls?
Thanks again guys
Stan

No crystal ball, I'm afraid. But just do the maths. £10K in 3.55% bond will produce £722.60 Interest in 2 years (£578.08 after tax).

Assume 2.75% applies for, say, 6 months, and it goes up to about 3.25% average for the remaining 6 months (about the most optimistic scenario I can think of). That would give you about £300 interest after a year (£240 after tax).

So to beat the bond, you are going to have to invest £10,240 and earn another £338.08 'net' (that's £422.60 Gross). So now you are going to have to find a home for a year, where you earn 422/10240 - or 4.125%

You simply need to make your own decision on how likely this is.