The six safest places for your savings

Bradford & Bingley, HBOS, Northern Rock, Alliance & Leicester, and the Cheshire and Derbyshire building societies have all fallen victim to the credit crunch. Amid all the turmoil, savers are becoming increasingly concerned about the safety of their deposits. Here are Times Money's six safest places to store your cash. 

1. Northern Rock

Since the nationalisation of Northern Rock in February, the Government now guarantees all deposits – even if they exceed £50,000. As the Rock has been desperate for cash to shore up its balance sheets, it started to offer more competitive savings rates recently, meaning savers have been benefiting from some great deals that are 100 per cent guaranteed.

More than £1 billion of savings has flooded into Northern Rock in the past two weeks, following the continuing chaos that has engulfed the banking sector. However, savers wishing to take advantage of the Rock’s rates should act fast. Under European competition laws, Northern Rock can not hold more than £17.6 billion in customer deposits - equivalent to 1.5 per cent of all savings held in British institutions.

It is thought the bank was just £1.5 billion short of this cap on Friday, before concerns about Bradford & Bingley had emerged. If the flow of savings continues at the present rate, the bank may only have a week or two left to take deposits.

2. Spread amongst all the banks

If you have a large amount of savings, one of the safest things you can do is spread the cash about different accounts in chunks of £50,000. If a bank did go bust, the Financial Services Compensation Scheme (FSCS) would guarantee the first £50,000 of your deposits with each financial institution.

Bear in mind that if you have savings products with different brands owned by the same company, the £50,000 limit applies only once. Halifax, Bank of Scotland, Birmingham Midshires and Intelligent Finance, for example, are all part of the same group and are registered with the FSA under the name of Bank of Scotland.

Savers with Alliance & Leicester and Abbey do not need to worry about the implications for their deposits after the Santander takeover of A&L, since A&L is becoming a subsidiary of Santander, which means it is retaining its separate banking license. Deposits of up to £50,000 with A&L and £50,000 with Abbey remain protected. This is not the case for savers with Bradford & Bingley, which is also being partly bought out by Santander, since B&B is not retaining its own license.

The good news for savers looking to spread their savings is that banks are still desperate for deposits and there are some great rates available.

3. National Savings & Investments (NS&I)

NS&I has always had a 100 per cent guarantee on all deposits, because it is backed by the Treasury. Although it does not usually offer best-buy rates, it has seen a marked increase in savers deposits this year. A spokesman said: "Our sales in 2007/8 were higher than expected - we achieved an additional £3 billion on top of our original forecast." 

4. Safety deposit box

One in ten people think their money would be safest under the mattress, according to a survey earlier this year by Newcastle Building Society. However, experts say that keeping your money at home is the worst thing to do in this situation. “Not only would inflation soon erode the value of the cash, but it can be dangerous as well,” said Mr. Mountford. “Most home insurance policies will only cover a minimal amount of cash, so if the money was stolen or destroyed, there may be little hope of redress.”

If you really do not want to keep your money in a bank or building society, a safety deposit box may be an option. However, there may be a long waiting list for a high street bank’s box and there will always be a fee to use it.

5. Your debt

One of the safest things you can do with your savings is pay off part or all of your debt. Melanie Bien at Savills, the broker, said: “Clearing debt is a very good idea at the moment – as long as people do not use money they may need at a later date. Almost all lenders will allow you to overpay by up to 10 per cent of your mortgage balance per year without incurring any penalities – Nationwide allows you to overpay by £500 per month. Overpaying by even a small amount can significantly reduce the interest you pay and allow you to clear the mortgage more quickly.”

The Student Loans Company allows you to pay off some or all of your student loan at any time – just call its helpline on 0870 240 6298 to ask for a final balance. If your credit card is still on 0 per cent interest, then remember you may as well take advantage of that for as long as possible, until your provider starts charging interest. With personal loans, providers will probably charge you an early settlement fee – usually of one month’s interest – if you choose to repay the loan early, so think carefully about that. Make sure that fee does not amount to more than the interest you would pay if the loan ran its course.

6. Ireland

Ireland's Government has promised to guarantee all bank deposits - up to no limit - at its six main banks for the next two years. The unprecedented action was done in an effort to maintain financial stability after Irish banks' shares collapsed.

Luckily for savers over here, there are several Irish banks that operate in the UK and will offer savers this 100 per cent protection – Allied Irish Bank, Anglo Irish Bank and Bank of Ireland. And savers with Post Office accounts, which are provided by the Bank of Ireland, will now automatically benefit from the increased level of protection.

By Lauren Thompson

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Comments

[Clayton S]

There is NO NEED for so-called safe-havens. Anyone with ANY sense knows that a good property or shares in a solid company will perform well in the long-run. Simple as. I KNOW.

[starling]

My mum's really good at investing, she made lots of money with it. But she still lost 50% of the value of her shares, Clayton. Don't be too sure of yourself. Remember those banks in the US were "solid" companies too.

My list.

1. In a sock
2. Under a mattress
3. In a chest on a deserted island
4. Buried under a tree
5. In the hampster cage
6. In the teapot

[Ray Massart]

7: a sealed McIntosh toffee tin, six feet down in the back garden. Watch out for inquisitive neighbours while digging the hole!

[mark hood]

Read Will Huttons' column in the Guardian and reflect on the complacency of the Uk authorities. There is time to act, but dont be inert. Best safe-havens: Gold, Livestock, Land, Government Bonds [Swiss, German, Swedish, avoid UK]

[Power of love]

Shows how much better off we'd be without money. If everyone lived off their own veg etc. and traded skills and goods with others in their own communities, this kind of panic would never happen! There would be no fear, just love.

[Alisha Allan]

An ethical UK building society that is large, like the Nationwide, Britannia, Skipton, Yorkshire etc. Their exposure to toxic debt from the money-markets is either zero or minimal and they work for their members - not dump-and-run corporate shareholders, as with banks.

If it must be a 'bank', the Co-Op.

The thought of rewarding Northern Rock, B&B etc. (by placing my money with them) for their incompetence and the government for it's lack of regulation is unethical and a waste of money.

[Geoff Mayor]

What about Mutuals
ie Coventry Building Society..how do they figure in the scheme of safety of assets?

[Garry]

As the Rock has been desperate for cash to shore up its balance sheets

If this is the case why did the Gov keep B&B's toxic debts and sell the £621M in savings....

[Tisch]

No, the safest place is still a bank.
The Volksbanken and Sparkassen system in Germany. Transfer all yr money to these places available everywhere around the country, all towns in Germany hv a few.

[Clive]

Do NOT invest the full £35000 in any one Institution. If the bank goes bust and you have invested £35000 then all you'll get back is the same £35000. Same as if you invest less and have the interest paid annually. However if you invest say £32000 and have the interest paid monthly then you'll get back what you put in plus any interest accrued each month, as long as he total does not exceed £35000.

[Jock]

Put your money in the Post office or an Irish Bank - Bank of Ireland

[Michael]

Safety should include ability to access as an element. On that basis everyone should keep some cash under the mattress since electronic funds could freeze very quickly if the wrong set of dominos topple.

[bernard]

I would have thought that HSBC was a good bet. It has more savers than borrowers, I read.
It may be just prejudice against this bank because the media think it is filled with people like the pink panther's 'Kato', who shout "hah so!" when you ask for a mortgage.

[Novel Chef]

Probably the safest place might be any venue where Gordon Brown has organised a party.

[Joe]

don't safe any, spend all in a good life! travel, love, a sport car and many excellent dinners (over the moon)

[warlock]

6. Ireland

Are the editors of the Times completely mad? The idea that Ireland (population 6 million) could actually stand behind a deposit guarantee for any significant amount of foreign deposits from the rest of the EU (population 500 million), is completely ludicrous. Responsible journalism at a time like this would involve pointing that out, not recommending the monetary equivalent of pouring gasoline onto a raging fire.

[JOHN BULLOCK]

WHAT IS THE POSITION OF BANKS IN ISLE OF MAN AND CHANNEL ISLES

[Finance Analyst]

Well at the moment keeping ones liquid cash is not safe anywhere in the world. The dollar is loosing its value. Its all fake currency. The best thing to do would be investing in real wealth like gold,wheat etc. and other commodities. So tomorrow if there is food crisis one would not die of hunger. Collapsing a bank is as easy as ABC.
say 10 huge investors think of taking a little of their money out of a bank. think what will happen? Another collapse.

Banks not safe in current situation

[Alan Williams]

How to determine the safest place to put your savings? Easy, lads... just watch what I do, and then go anywhere else. My slowly-hatching nest-egg for retirement has, in turn, been placed in the "safe hands" of UK Provident (remember THAT one??), Equitable Life... and now? That's right, Icesave! Now... anyone wanna nice tip on the gee-gees???

[Mark]

Clayton: "Anyone with ANY sense knows that a good property or shares in a solid company will perform well in the long-run. Simple as. I KNOW."

Define long-term. Late 90s market level may never return. Dow Jones from 1965 till 1985 virtually unchanged at all. If you're prepared to wait 25-30 or more years, then OK.

[dave]

How about buying up 2 years worth of canned foods - which have a shelf life of three years. Then go back to weekly shopping to regularly replace what you use. You'll avoid rising food prices and get a rate of return higher than leaving in a bank. And if the banks go bust at least you can still eat. The only snag is - storing it.

[G, Penerly]

@ Alan Williams, you are the unluckiest man in the world. Watch out for falling pianos on your way home tonight...

[Roy Senior]

I have £49k in a joint account with ING, am I covered by the government's increase to £50k and £100k for joint accounts given that ING is a Netherlands company?

[George]

HSBC is as safe as houses, put it there.

[Tony]

Any of the Australian/New Zealand banks which, by and large, were not involved in toxic CDOs. But watch out for currency movements.

[Jill Allan]

I too would be interested to know the position regarding ING.

[Michael Fennelly]

We are all doomed I say doomed

[naqvi]

yes i agree with most of the people saying that HSBC is the safest bank.

[Carlos]

JOHN BULLOCK:
We have (had!) an off-shore account in the islands with NatWest - 2/3 don't have ANY guarantee, while one had a guarantee of max 15k GBP - I think Isle of Man, but can't remember to be honest. Have promptly transfered to on-shore accounts (as I live abroad still no tax liability).

CH good place for saving/investing as they have a deposit rather than credit-based investment system.

As for paying off student loans - give me a break, I think my sides just split - 9/10 ex-student friends have not paid off their loans and, 10 years later, still don't plan to even though they could afford it!

[Mikey]

I would also like to know the position with ING Direct as it is a Dutch company.

[PeeDee]

ING is licensed in the UK so the full £50000 applies.

[Nobby Clark]

Here's a radical idea: how about spending your money? Build an extension... buy a new car... buy a new telly (if they have any in stock after the MPs have been there first)... go out for dinner... put your kids through private education... go on holiday... the list is endless. Those with money have a duty to spend as much of it as possible in order to shore up our economy! Some of it will flow back to the banks and government naturally, given time; some will just be a confidence-boosting indulgence. But everyone will win in the end.

[Paul Hunt]

Bernard - "I would have thought that HSBC was a good bet. It has more savers than borrowers, I read".

I think you will find that this is true of most financial institutions, usually in a ratio of at least 4:1 and in some cases as high as 10:1.

This ratio in itself is not a sufficient measure of strength. What is more important at the moment is the level of exposure to lower quality (sub-prime) lending. Unfortunately this information is not so easy to obtain.

[Lucy]

the bit about saving in different banks that are all owned by one company such as HBOS may not neccessarily be true as i work for the royal bank of scotland group and they have informed staff that if customers have accounts with both Natwest and RBoS then they are allowed to apply twice for their money back with the governement guarentee

[dave]

George - "safe as houses"?? Have you seen what's happened to house prices??

[Dean Hallett]

Dear Power of Love - Love is in short supply at the moment - this has pushed the price up on international markets to over $1000 per International Love Union Voucher Unit(ILuvU). Love Spreads are also at an all time high - traders are currently valuing Love Over Gold, as apparently in these chaotic times Love Is All You Need. Lots of Love x

[Charlie]

er slightly out of date - the Rock stopped taking retail deposits over a week ago

[will]

power of love
what you prescribe is called subsitance farming, it took us thousands of years to move away from it and people choose to live and work in the dark satanic mills as a choice superiour to your little utopia.
if you want to be a subsistence farmer in some little commune go ahead

[Mark H]

ING Direct is under the passport scheme where the EU country guarantees the first X amount and the UK scheme guarantees the rest up to £50k. At the moment the Dutch government guarantees £77k. There are 2 problems with this 1. You have to deal with a foreign country when you make a claim and 2. there's no guarantee the country will cough up (e.g. Iceland) - but the UK government might bail out savers for the full amount anyway if that happened, like it did with Iceland.

[Ram]

I left UK for Australia in July 03 and havibg sold our properties etc-deposited the amount in Offshore Premier A/C LTSB, Isle of Man and only recently put in August 600,000 pounds in Money Markets thru the same bank for six months. Appreciate any advice.

[Ben]

Has nobody heard about inflation? If you keep savings in hard cash they could become worthless.

For what it's worth, I reckon HSBC, property abroad, the Post office or Irish/Greek/German/Swedish banks.

[tony]

I have not seen any informed comment on the safety of savings in building societies in general. (not turned to banks). What is the risk?

[Mike Quinn]

8: in the sealed McIintoshes toffee tin (check for rust!), buried in the front garden, 20 feet deep (dig at night) over plant with hawthorne bush and encircle with barbed wire fence.

[Bob]

Are accounts held in HSBC Jersey, Channel Islands protected?

[Chris]

Putting your money in an Irish bank at the current time is just so stupid it is risible.
The smart money started to move out of Ireland a few weeks ago.

[belinda]

But as Keynes said, in the long run we are all dead.

[Chris Stuart]

What a lot of people do not understand is that if all the banks or a significant number fail at once there will be no bail outs or that average will apply where you get 50p in the pound or 70p in the instead of a pound. In that case UK will be bankrupt. Best way is to have some abroad some here. Cheers!

[anna]

Tony. re building societies- take a look at sat guardian, it seems most have nil exposure to bad loans. Does anyone know of similar article regarding level of safety of remaining banks? anna.

[MPR]

Does anyone have any thoughts on holding money in a foreign currency like Canadian Dollars for example?

MPR

[Paul]

With debt being transferred from troubled lenders to national governments, you have to worry about their capacity to absorb this. Are the guarantees worth anything? Is Iceland to the coming crisis what Northern Rock was to the present one?

Gold ownership gives you direct property rights but it is volatile stuff to hold. But having some at times like these is a good insurance against a total financial collapse.

As for those suggesting houses - I suspect they are estate agents. You would have to be completely mental to 'invest' in a house at this time.

[john]

Get it over to a Hong Kong Bank.

100% protection until 2012

[MPR]

I heard on the radio today that the Isle of Man was a very risky bet and that the 50K guarantee was worthless. Is this true? Im thinking of an off shore account with HSBC

[Stu Peters]

I live in Canada and our dollar has been growing stronger against sterling for 3 years now; From around 2.4 $CAD to the pound down to $1.90, the Alberta oil patch has been a major influence, witness our dollar falling back to 2.05 due to the recent fall in the price of crude.
However we have a balance of trade surplus each year and possess vast quantities of commodities, right now about 80% of our trade is with the US so we are vulnerable to lack of demand from south of the border.
But, long term, this vast land has a great future.

[owldshep]

Spend, spend,spend, enjoy it and then live on benefits.

[Michael Briant]

What about the India bank ICICI. I think it is the main or national bank of India. It is mostly an on-line bank, like ING but hisher interest, but has a few branches in UK. It is FSA secured to the usual £50,000. I'm guessing this may be OK as India is one of the fastest growing economies in the world. Any ideas anyone?

[Sal]

Yo

Diversification is the only way to protect assets.

That means multiple investments in multiple geographies grounded in multiple technologies.

If we are talking straight cash diversification there are robust deposit protection schemes in the UK, Denmark and Holland. Uk - £50,000 deposit protection. Denmark and Holland 100,000 euros equivalent for their sterling accs.
These cover for instance deopsits in ING (Under the dutch deposit protection scheme) and Den Dansk (Under the danish deposit protection scheme).

Ireland says its unlimited, but if two of the big banks went its unlikely they could cover 100%.

So spread it around.

[J. Collin]

I, I think foolishly, invested one hundred an fifty thousand in Abbey Santander this year for three and a half years. I've thought about getting out but it's already lost around 30%. I'm reassured it's safe, guaranteed that after the term I'll get my money back. Anyone else out there with a similar investment? Thanks, jack.

[Sam]

Gold and silver in hand if you want currency. Land and food if you want possessions. Guns and ammo if you want to keep both.

[R. Maxwel]

Give me the money to look after. I will ensure it is safe!

[kate]

Re IOM Banks
Everyone is watching carefully the outcome of the Kaupthing Singer and Friedlander IOM situation .
KSFIOM was a solvent back until HMG froze the Icelandic assets.
The Depositors Action Group (DAG)
www.depositorsksfiom.org are putting up a tremendous fight to regain their lost savings. A battle of truly David and Goliath proportions as a small group of British savers take on the might of the British Government .

[jonty]

The safest place for money for the next 5 years without a doubt is in physical gold. It has always been money and always will be. national and private debt are just going to get bigger and bigger. And the easiest way to pay this off is the electronic printing of money. We are in a deflationary period for the next 9 months and then its going to be inflation time.
If you put your money in a gold ETF make sure its physically backed.

I think gold will be the new property boom and I'm getting in now.

[Resab Kazazic]

Go grab Vision of Islam by William Chittick & Suchiko Murata.

And then ponder why Islamic Banks & Middle Eastern markets escaped the Credit Crunch.

And if it taxes your brains- just read The Vision of Islam. The answer is right in there.

Together we can make this world a better place.

Another grabber is Martin Ling's book- Life of the Prophet, based on earliest sources. Martin was curator of orignal arabic manuscripts at Cambridge University!

[William]

Miss Thompson obviously knows very little about the financial markets and has made some suggestions which to be honest are rather weak, and that are based on promises that are either easily broken (Iceland???) or that offer little return.

If Ireland should have a bank crisis like Iceland, the government would then default on paying back any of your money, as it would bankrupt them. And please do not convince yourself this is an unlikely situation.

Without rebutting all your suggestions which were rather poor and had a strong element of risk attached, or low returns, i would suggest that you invest your money in nationwide. Do the research yourself.

[Bob Bottomley]

Your NS&I Isa rates are way out of date! Currently they stand at 3.30%

[Michael Purches]

I hope Lauren Thompson's financial advice is better than her understanding of the difference between license and licence!
Michael Purches
Abingdon, UK.