Are your savings safe? article discussion

jamesd

Meltdown, thanks, that FSCS document says that the new arrangements described by the FSA in its document are in place.

polyphonic99

The advice from everyone from the Chancellor, newspapers, even this site seems to be that if you deposit the £35000 limit in one account, that it is safe and guaranteed by the FSCS. Well the capital may be safe but the interest will not be. In the unlikely event of a bank failure you would get your deposit back but not your interest. This will affect deposits from between £33020 and £35000 at interest rates of 6% for example. This was discussed on Radio4's Moneybox on 12/04/08. Currently unless the government changes the rules you have 2 options:
1) calculate and subtract the interest earned from the initial deposit so that the interest earned and the capital never exceed the £35000 limit during the term eg £33018 @ 6% will generate £1982 annual interest. Added together = £34999
or
2) if you deposit the full £35000 in one account choose to receive monthly interest which should be paid into a separate account from another provider that has its own FSA registration. That way you mitigate the risk to losing just one months interest rather than a whole year if a bank goes bust.

Unfortunately the Consumer/Deposit section on the FSCS website does not make clear what happens to Interest, it only refers to Deposit. This should be changed so that savers clearly understand the situation.

Likewise THIS Website should be updated to make the situation clear.

tawse57

Yes, I keep seeing people recommending to put 35K into a bank but you should, IMPO, put no more than 30K in any bank allowing for 12 month'so f interest. Once you get up to around 32K including interest you should withdraw money.



polyphonic99 - when I first read your post I read it as meaning that your interest would not be paid even if it was well under 35K. In other words, if you had 2K of savings, had earned £150 interest then you would only get the 2K back and not the £2,150.00.

My heart skipped a beat for a moment there!

chris1

tawse57 wrote: »

In other words, if you had 2K of savings, had earned £150 interest then you would only get the 2K back and not the £2,150.00.

My heart skipped a beat for a moment there!

It's my understanding that if interest has already been credited to an account than of course it would be included, but the situation is not clear for interest accrued but NOT paid.

Does anyone have a definitive answer?

baby_boomer

Kaupthing Edge accuses four hedge funds of trying to drive it into bankruptcy

Is the extra rate worth the risk of having your £35K left high and dry in the hands of the compensation schemes?

Kaupthing freezes 6.5% rate

"....Kaupthing stormed onto the UK savings market this year, but has since endured a tirade of unfavorable press after Morgan Stanley revealed its borrowing costs have increased 400% over the past year and analysts concluded it is 7.5 times more likely to default than any other European bank...."

1echidna

"Is the extra rate worth the risk of having your £35K left high and dry in the hands of the compensation schemes?"

It seems that every bank trying to attract customers with good rates is being subjected to some kind of speculative attack. It appears that Bradford and Bingley were subject to false rumours that they were about to offer a rights issue which they have had to deny (see BBC). We had an attack also on HBOS recently. It appears that on a falling stock market city types are resorting to malicious rumours to further their business. It is time a few were caught and jailed rather than savings customers leave perfectly good banks like lemmings.

baby_boomer

1echidna wrote: »

It seems that every bank trying to attract customers with good rates is being subjected to some kind of speculative attack.

Certainly the banks in direst need of cash are likely to be the same ones offering savings rates 1.5% above base rate. It's hardly sustainable business. I'm not surprised that a headline savings offering might get the City talking.

1echidna

baby_boomer wrote: »

Certainly the banks in direst need of cash are likely to be the same ones offering savings rates 1.5% above base rate.

The term "direst" is an emotive one. I admit I have got money in a number of high interest accounts and don't want to see the banks issuing them fail, particularly due to untrue malicicious rumours causing a run. Have you got money at stake in seeing them fail?

baby_boomer

1echidna wrote: »

Have you got money at stake in seeing them fail?

Would I admit it if I had? [b_b waits in trepidation for MSE to report him to the FSA so that it can bring its first ever successful "trash & cash" prosecution ]

The whole issue of the credit crunch is that many institutions are in dire need of cash as mortgage institutions lend long but borrow short. I don't apologise for the word "dire" as it helps explain savings rates at an unprecedented 1.5% above bank base rates.

I think you need to address any accusations of rumour mongering to Morgan Stanley and the Mail on Sunday; I was reporting facts they had put into the public domain to help people make up their own minds.

Of course we hope such savings rates will merely result in a hit on the profit & loss account for next year - or, better for savers / shareholders, higher mortgage rates if the market will take them.

1echidna

Have you got money at stake in seeing them fail?
Would I admit it if I had?

Probably not but at least I have planted the possibility in people's minds.