85k limit, how important is it?

tiger135

Just opened a virgin savings account 5.12 in addition to my nationwide at 4.25%. Now wondering how much to transfer, the whole lot of 180k would give the most interest but I know about the 85k protection. 
Should I just transfer 85k to virgin to stay on the safe side? 

Brie

Is it an account for just you or is it joint with someone else?  If joint there's £85k protection for each.  

Personally I'd stick to the limit but it's not a problem I have currently as I don't have that kind of cash available!!

InvesterJones

I'm afraid only you can answer how much risk you're willing to take. If you want to stay 100% safe, stay within the limit, if you don't, don't. Perhaps work out what the opportunity cost would be and ask yourself how that compares to whatever worry you would have about it not being 100% covered.

Bigwheels1111

So you would like to risk 95K for a little bit of interest.

Have you lost your mind.

Is there a risk yes, what is the benefit ( not much ).

At 5% I would not put more than 81K in a bank or savings account.

81K risks £50, because FSCS covers 85k, not the interest over 85K.

Just open 2 or 3 accounts with other banks.

eskbanker

tiger135 said:

the whole lot of 180k

Do you have plans in the foreseeable future for £180K?  It's a lot to be holding in cash deposit form, so begs the question of whether there might be better things to do with at least some of it, such as investing, either standalone or within pensions....

tiger135

It may be used for property in the next year or two.
Thats why I want to keep it accessible.
The reason I opened virgin is I already had a login account with them for a past mortgage and some past savings accounts.
Ive heard it can be a chore opening new accounts, for example ulster bank, so didnt want to open too many.
So 80k maybe in two accounts over 5% would be sensible?
And maybe put the other 20k in a investing ISA via trading 212?

masonic

Ulster is a bit of an exception. Most online savings banks will have an account open and ready to fund after filling out a 5 minute application form. I wouldn't recommend investing any part of the £180k that you plan to use within a few years.

refluxer

There are quite a few easy access accounts with other banks that pay around the same rate (or some even higher) so it doesn't make sense to risk it. If I was in your position, I would spread that over 3 different banking institutions as I wouldn't want to hold more than £80k with any one, personally (to allow room for any interest due).

In terms of opening accounts being a chore, I've opened a lot of accounts with banks and building societies as a new customer in recent years and not had any major problems with any of them. If you choose a bank who don't rely on the post when sending out online banking information and you pass their online ID checks, then you can often get set up and running almost immediately. Having a couple of different current accounts can help if any require a nominated account and there is an issue with one of them.

Paragon's Double Access account is currently the highest-paying easy access account and would be a good home for a chunk of the money that you won't need a lot of access to while it's saved. I've had a number of accounts with them over the years (including that account and various fixed rate accounts and ISAs) and never had an issue.

Wheres_My_Cashback

Risk will depend upon your own personal risk aversion level, not that of any forumite here.

Generally you'll find people here that mention it will stick to the £85K max, however the chances of losing your money on anything above that is really extremely low, but not impossible.

UK Banks and building societies do not go under like high street stores, it's extremely rare indeed and if there was an increased threat of it happening, then depending on who it is the Government could/may actually step in.

Would I exceed £85K? Yes, depending on who it was with and what the rate was.

Albermarle

Personally I would not be stressed by having a bit more than £85K with one provider , but for sure not £180K , or even £100K .

cwep2

Personally I distinguish things into a few tiers:
- Newish start up savings provider (say less than 5-10yrs old)
- UK high building society/street bank that's been going for 50+yrs
- UK Clearing banks
- GSIBs (Globally Systemically Important Banks) https://en.wikipedia.org/wiki/List_of_systemically_important_banks

The first lot could disappear without a trace with some bad loans, max 85k for me.

The second list would be like Northern Rock - remember at the time they went bust the amount FSCS protected was 100% of £2k and 90% of the next £33k - but the govt stepped in to make everyone whole. Sure no guarantees it would happen but it's a lower risk than the first list. For me wouldn't sweat going above 85k for a few weeks/months but would probably not go above 100k deliberately.

The third list are systemically important for UK financial services, they also have extra support from the Bank of England. It would be damaging to the whole payments network if one went down - people not getting salaries paid, DDs not collected impacting businesses etc. Knock on effects would bung up the whole financial system in the UK, a lot of money going out from one place depends on it coming in from another, so cut off one node and there will be some problems almost everywhere. For me would be happy with larger amounts at one of these - if one goes down then we are probably in financial crash territory - if your money is invested in stock markets instead they will be plunging in value as well. Virgin Money is in this tier (they merged with Clydesdale Bank) as is Nationwide.

The fourth list - well governments are basically expected to backstop these banks - if one goes down the global financial system is in trouble. Honestly I wouldn't worry about any amount of money in any of the banks in this tier.

All the above though is subject to not having all your eggs in one basket. Even if you have less than 85k in an account, if they go bust you potentially don't get access to it for days/weeks (up to two weeks officially). I would routinely recommend anyone who is able to has two current accounts and their emergency fund split across two savings accounts with enough in the 'spare' one to get money out of a cash machine or transfer to main current account to pay an unexpected bill. The same is true in terms of having more than one payment method, I've lost count of the number of times I've tried to pay for something online and been declined for some reason, even after passing 2FA, and had to use a different card.

But everyone has different risk tolerance - and losing an amount of money will have a different impact on different people. The 85k guarantee is great and gives peace of mind and given you can split it across different accounts in multiples of less than 85k with 100% protection - many people wouldn't understand why anyone would take that risk, but equally many people on this forum wouldn't understand why you would leave anything in an account earning 4.25% when you could open any one of about 10 accounts earning 5%+.

TL;DR - Virgin and Nationwide are pretty much equal risk, but both very very very safe. Really, it's not much work to open a 3rd account paying 5%+ and put 80-85k ish in the two highest paying and the rest in Nationwide - this is what most people would recommend. But if it was me I wouldn't sweat it and would be OK with putting most into Virgin.

I have had >the 85k at times in the last year in both Santander and Virgin, but I looked up their CDS prices before I did so, and set alerts on the share prices (which would be a very early indicator something was going bad) with the intent that if it fell by a significant amount I would reduce amount to below £85k within 24hrs.