How to keep your savings safe – the idiot’s guide

Given the recent high profile collapses of Icesave, Kaupthing Edge and Hertiable Bank; and takeovers of Halifax and Bradford & Bingley it’s not surprising that UK savers are more concerned with whether their savings are safe than what’s the highest interest rate they can earn on their savings. But, it is still possible to get the highest savings rates whilst ensuring that your savings are protected up to the maximum of £50,000 per person per institution.

Here’s how to do it…

1.    Get a Cash ISA.

Cash ISAs work just like a normal savings account, but the interest you earn is tax-free, which is especially valuable if you’re a higher rate tax payer. You can save up to £3,600 each year in a Cash ISA. You can compare Cash ISA best buys and read our guide to Cash ISAs for more information.

2.    Get an Internet Savings Account.

After tax-free savings it’s usually a good idea to have some savings in “near cash” meaning you can access your money easily in the event that you need to. Internet Savings Accounts allow easy access to your savings and are offering some high interest rates. If you don’t fancy an Internet Savings Account then you could always try a No Notice Savings Account instead.

You can compare Internet Savings Accounts best buys and No Notice Accounts best buys; and read our guides to Internet Savings and No Notice Accounts for more information.

3. Get a Notice Savings Account

Now you’ve used your tax-free allowance and saved some cash in near cash, the next thing to do is to go for short-term savings account. By putting some savings into a Notice account you can earn a higher rate of interest in return for agreeing to tie up your savings for a set period of time, usually 90 or 180 days.

You can compare Notice Savings Account best buys and read our guide to Notice Accounts for more information.

4.    Get a Short-term fixed rate savings bond

If you’re lucky enough to have any savings left after sorting out your near cash and short-term cash requirements, then a Short-term Fixed Rate Savings Bond will provide higher rates of interest in return for locking your savings away for a set period of time, usually 12 months.

You can compare Short-term Fixed Rate Savings best buys and read our guide to Fixed Rate Savings for more information.

5.    Check who owns who and who has a banking licence

By using our best buys you can create a short list of savings accounts to get the highest rates of interest. What you need to do next is to work out who owns who and who has a banking licence. We have a complete list of who owns who and who has a banking licence which will help you do this.

The trick is to ensure that you don’t have more than £50,000 with any one financial institution or with institutions that share the same banking licence. This will ensure that your savings are fully protected by the UK Financial Services Compensation Scheme up to the maximum of £50,000 per person, per institution. 

6.    Check which Banks are in the UK

By referring to our list of who owns who and who has a banking licence you will be able to see which Banks are “EEA” Banks. EEA banks means banks that are part of the European Economic Area, and whilst several EEA banks have topped up into the £50,000 protection offered by the UK Financial Services Compensation Scheme, in the event of a claim you will have to make two separate claims, one for the first €50,000 with the relevant country’s depositor protection scheme and the remainder with the UK Financial Services Compensation Scheme.

If you want to be ultra cautious with your savings you may wish to ensure that they are all with institutions wholly under the UK’s Financial Services Compensation Scheme.

We've also put together an "are my savings safe" calculator which can help you do all of this.