Savings |
|
Your Money > Savings Articles > The Safest Accounts...
|
|
By Donna Werbner
Out of anyone in Europe, they're supposed to be the most cool-headed and logical. So when the Germans start panicking about the safety of their savings, you can bet a few million Euros that everyone else is, too. At the time of going to press, there was as yet no clarity on whether or not the German Government plans to offer a blanket guarantee on all accounts held by depositors. But there does appear to be some backtracking going on. It is now being suggested that the German Chancellor, Angela Merkel, was merely making a 'political' commitment that German savers would not lose out if a German bank were to go bust. In other words, it's an 'implied' guarantee similar to the one our Chancellor, Alistair Darling, made when he said he would do whatever it takes to ensure financial stability. So what does this all mean? And how does it affect the safety of your savings? How safe are your savings? At the moment, the British Government has stopped short of guaranteeing all deposits will be safe if a bank goes bust. From Tuesday, the amount guaranteed by the Financial Services Compensation Scheme (FSCS) rises to £50,000. This, the Government claims, will protect 98% of savers. If you have more than £50,000, you can simply spread your money around between different banks and still stay safe. Sounds simple? There are two potential pitfalls to bear in mind:
No wonder that savers looking for an easy life are pouring their money into banks which do have 100% guarantees backed by Governments. These are: 100% British Both Northern Rock and National Savings & Investments (NS&I) offer you a 100% guarantee that your savings will be safe, even if you save more than £50,000. Unfortunately, Northern Rock has pulled its instant access savings account following a huge increase in demand over the past week. It still offers a decent fixed rate Cash ISA at 6%, but most of its products are pretty uncompetitive indeed, they are deliberately so. NS&I, on the other hand, offers extremely competitive savings certificates linked to the Retail Prices Index, which is currently 5.2%. The certificates are guaranteed to beat this index, a measure of inflation, by at least 0.85% a year, giving an overall return of 1%AER if you hold the certificate for its full term. And best of all, the return is tax-free. To get an equivalent return elsewhere, higher-rate taxpayers would have to find an account paying a whopping 10.33%, while lower-rate taxpayers would have to find an account paying 7.75%. Of course, inflation may fall soon, bringing the RPI and the rate down. But at the moment, it is by far the best return you can get on a 100% safe account. However, you do need to be prepared to lock your money away for at least a year to earn any interest at all. And the maximum you can invest in each certificate (there are two a five-year certificate and a three-year certificate) is £15,000. 100% Irish Irish banks, such as Bank of Ireland and the Anglo-Irish Bank, have a 100% guarantee from the Irish Government. This includes savings accounts with the Post Office, as it is funded by the Anglo-Irish Bank. If you're looking for a 100% safe instant access savings account, the best one around is the Anglo Irish Easy Access Deposit Issue 2 account. It currently pays 6.4% AER, which is only 0.2% below the overall instant access best buy account, the Alliance & Leicester eSaver Issue 2, which pays 6.6%. But there is a big down-side of the Anglo Irish account, for me: you cannot operate it online all transactions must take place via the telephone or by post. On the positive side, however, Anglo Irish will transfer funds into your current account via CHAPs (same day) transfer at no extra charge. 100% Danish The Danish Government this morning (Monday) offered a 100% guarantee on all savers' deposits. However, this is not much use for savers in the UK, as no Danish banks operate here.* What next? If Germany does decide to guarantee 100% of savings to shore up confidence in German banks, then it is highly likely that Britain will follow suit. What do Fools think? Would this be a good idea? Are you worried about your savings? What do you think the future holds? Let us know, using the comment boxes below *This article has been corrected - there was a Danish-English misunderstanding, it seems! Useful links:
Copyright © 2008 Fool.co.uk - Savings Accounts Team. All rights reserved. |
| ||||||||||||||||