Are there signs a savings account bank will be solvent, in two years time?

pw23

first of all, I know nobody has a crystal ball

I want to invest my 85K of savings into Oxbury. Bank but understand that there is the possibility they could go bust before the end of my two year fixed term 

so was thinking about putting half in the repeatable Tandem bank at 5.5%, and the other half in Oxbury bank at 6.01%.

But as a determined money saver, it bugs me a bit to lose out on the extra .51% on half of the saving (£433 extra interest, after two years).  but I do realise I am also at risk of losing all of the interest if Oxbury went bust.

so are there any clear signs to look out for when investing money in a long fixed savings account that would suggest your savings wouldn't be likely to pay the interest at the end of the term?

also, does my 50:50 split seam wise to you? Or would you share the money even further in other more reputable banks?

Brie

wouldn't it be safe if you have the option that it's paid monthly?  So split 50/50, interest paid monthly and the balances are both under the £85k safe limit throughout the 2 years.

eskbanker

pw23 said:

...I do realise I am also at risk of losing all of the interest if Oxbury went bust...

No - as long as you save your money in FSCS-protected institutions then in the event of their failure you'd receive not just your capital but also interest earned up to that point, as long as that total is within the £85K limit.

You can take a view about which banks are more or less 'reputable' than others but FSCS protection is all you really need to be concerned with if you're fixing money over multiple years.

Obviously if you have exactly a lump sum that equates to the FSCS limit then you should split it across multiple institutions to ensure protection of the interest as well as the capital.

P.S. Did you mean to post this on the stoozing board?  You obviously could be stoozing but it would seem more closely aligned with the savings board....

Arthog

Never have all your eggs in one basket.

pw23

I got a reply from Oxbridge bank and they confirmed that the interest would be protected by the FSCS up to 85K including my investment

So how does this plan sound to you?
invest 75K in Oxbury at 6.01%, so, after two years would have a total of £84,429
put the remaining 10 K in a different savings account, but would I then lose protection on that money?
If so, I will stick it in a cash ISA

or is there a different way to manage the money to profit more?

eskbanker

pw23 said:

I got a reply from Oxbridge bank

That should ring alarm bells then, are they a clone perhaps?

pw23 said:

invest 75K in Oxbury at 6.01%, so, after two years would have a total of £84,429
put the remaining 10 K in a different savings account, but would I then lose protection on that money?

Your total protection would be £85K, so you'd immediately exceed that if you mean saving both pots with the same bank, or do you mean putting the £10K in a different bank?

boingy

In answer to your question, no, there are no early warning signs at our end of the food chain. By the time we hear about it it has already happened. But it's vanishingly unlikely to happen and the money is protected up to that limit. Personally I'd be comfortable putting the whole £85k in one account with the knowledge that any interest could be lost if the worst happens but the reality is that even if a bank gets into difficulty it is most likely to be bought or merge with another bank rather than just implode.

Other folks might choose to be more cautious but if a UK bank does truly implode we'll all have bigger worries than a bit of lost interest. Our pensions, jobs and the wider economy will be knackered for years.

xylophone

but understand that there is the possibility they could go bust before the end of my two year fixed term 

Have you information/evidence to back up your "understanding"?

pw23

xylophone said:

but understand that there is the possibility they could go bust before the end of my two year fixed term 

Have you information/evidence to back up your "understanding"?

No, I just thought that was the reason why everyone says to spread your investments out
Why else would they jeopardise interest by putting part of the money in a lower yielding fixed account?

pw23

eskbanker said

Your total protection would be £85K, so you'd immediately exceed that if you mean saving both pots with the same bank, or do you mean putting the £10K in a different y 

i'm now thinking about putting 75K in Oxbury 6.01% two-year fix, and then the remaining 10k in Metrobank at 5.9%. For 18 months.

However, come to think of it, after two years, both investments in total would be worth

 84429 + 10885 =,£95,314

so if my calculations are correct, I would risk losing £95,314

so I wouldn't be covered for the final 10k, right?

EthicsGradient

pw23 said:

eskbanker said

Your total protection would be £85K, so you'd immediately exceed that if you mean saving both pots with the same bank, or do you mean putting the £10K in a different y 

i'm now thinking about putting 75K in Oxbury 6.01% two-year fix, and then the remaining 10k in Metrobank at 5.9%. For 18 months.

However, come to think of it, after two years, both investments in total would be worth

 84429 + 10885 =,£95,314

so if my calculations are correct, I would risk losing £95,314

so I wouldn't be covered for the final 10k, right?

No, it's 85k per institution. So 75k into Oxbury (with nearly 10k interest due after 2 years), and 10k to Metrobank, would mean it's all covered.

The thing to remember is that it's the "institution" that counts - so 2 accounts with HSBC are only covered up to a total of 85k between them - or 1 account with HSBC, and one with First Direct, because HSBC owns First Direct, and they count as the same institution.