Santander-Am I a fool busting the FSCS limit with this bank?

smjxm09

I have bank accounts and ISA's with Santander that already take me past the £85000 limit by a couple of thousand pounds but with the new limit cut to £75,000 my exposure will be increasing if I do nothing. The problem is if I move any money I will take an interest rate hit.

I have taken the view that if the bank was starting to get into any difficulties I would read about it first and could instantly move money out of one of my Santander bank accounts to drop the total sum below £75000 via a bank transfer.

So the question is am I foolish taking this approach or wise hanging on to the extra interest?

bigadaj

Arguably.

What interest rate are you getting on your current money, cash isas are dire so there won't be any financial benefit from keeping this, either transfer to s and s isas or put ,Indy into current accounts elsewhere, bos would be an alternative for £15k.

smjxm09

3% on bank accounts and 2.3% on isa's with Santander. I would not want to fix an isa's longer than 2 years as I think rates will eventually climb.

I can't move any more money to new current accounts as I have plenty at the moment and have run out of standing orders to feed any new accounts. I have already maxed out accounts that don't require standing orders like the TSB and Tesco Bank so this takes me back to my opening question. Do I take an interest rate cut and move an ISA? I find it hard to believe the Stantander could go bust with not a hint in the press first about its pending demise.

Annisele

smjxm09 wrote: »

I have taken the view that if the bank was starting to get into any difficulties I would read about it first and could instantly move money out of one of my Santander bank accounts to drop the total sum below £75000 via a bank transfer.

I think that part is foolish. By the time any difficulties are reported in the press, Santander itself knows all about them - and will probably have restricted the amount its customers can withdraw.

But in principle, taking the view that Santander is a pretty solid bank doesn't sound daft to me. Hopefully I'm not eating my words in a year!

Newly_retired

Who knows about the future stability of Santander or any of the banks really? It is safer to stick within the limit of FSCS cover.
Have you used Regular Savers? Many of them are paying good rates, better than Santander.

eskbanker

If you have £87K in Santander and plenty of funds in other interest-paying bank accounts, perhaps you should consider whether you should diversify into investment rather than holding so much in cash deposit form, unless you have shortish term plans for the money?

colsten

smjxm09 wrote: »

I can't move any more money to new current accounts as I have plenty at the moment and have run out of standing orders to feed any new accounts. I have already maxed out accounts that don't require standing orders like the TSB and Tesco Bank so this takes me back to my opening question.

You can't ever run out of standing orders as you can set up as many as you like, any time you like. Also, none of the current accounts require SOs. You mean Direct Debits, which are totally different to SOs.

But even DDs are easy to get. As you already have internet banking with Tesco, it will take less than five minutes to set up a couple of Tesco savings accounts. You can then pull money into these savings accounts from any number of your current accounts. These will be processed as DDs.

I think it is foolish to exceed the £75K FSCS level, yes, and I will be reducing my funds in Santander by the end of the month myself.

Nick_C

Moving money from Santander savings to Shares, although sensible in my view, doesn't really alter the risk. It just changes the nature of it.

If you were happy to accept an element of risk, you would already be investing instead of saving. So I suspect the right answer for you is to reduce your savings with Santander below the FSCS level, and lose interest.

Although maybe having thought about the value of exposing yourself to some risk for better returns, this might be the time to start dipping your toe into the water and investing come of your capital.

Malthusian

There are some who believe that in the event of another bank catastrophe, the government would guarantee all UK deposits, including those above £75,000. Exactly as they did with Northern Rock. Otherwise every single depositor would withdraw his savings from every bank and the UK economy would collapse.

Personally, I am not that sanguine, and I suspect that if there was a crisis those people lucky enough to have more than £75,000 may be seen as fair game to be called upon to make a sacrifice for the nation. You never know with politics.

For me the question doesn't arise because I wouldn't keep £75,000 in the bank for any length of time. If I had more than £75,000 in cash to (say) buy a house it would be short term and I wouldn't care about the loss of a few quid in interest. If you have more than £75,000 in the bank long term, inflation risk is a much more pressing risk than the possibility of bank collapse.

Nick_C

Malthusian wrote: »

If you have more than £75,000 in the bank long term, inflation risk is a much more pressing risk than the possibility of bank collapse.

With CPI inflation around zero, its never been easier to get a real return on money in the bank.

MEM62

smjxm09 wrote: »

I have bank accounts and ISA's with Santander that already take me past the £85000 limit by a couple of thousand pounds but with the new limit cut to £75,000 my exposure will be increasing if I do nothing. The problem is if I move any money I will take an interest rate hit. Then your decision is a classic risk / reward judgement - which only you can make as only you know what level of risk you are comfortable with.

I have taken the view that if the bank was starting to get into any difficulties I would read about it first and could instantly move money out of one of my Santander bank accounts to drop the total sum below £75000 via a bank transfer. Don't count on it! Financial institutions do not always slide into oblivion - some collapse. And they may try to prevent withdrawals if the get into trouble.

So the question is am I foolish taking this approach or wise hanging on to the extra interest?

I don't think you would have issues with Santander but in the past we would have thought that of almost any 'reputable' institution. The amount of interest you would loose on the amount you have invested over the £75K is modest so move the excess if it brings you some comfort. It really is a personal call.