Home > The Credit Crunch > Where is my Money Safe?

Where is my Money Safe?

By: J.A.J Aaronson - Updated: 25 Jan 2013 | comments*Discuss
 
Where Is My Money Safe?

In these times of global economic uncertainty, many people are understandably nervous about their money. The collapse of Northern Rock was perhaps hastened by the first run on a bank that this country has seen in many decades. Depositors flocked to their nearest branch to withdraw their savings, concerned that their money was not safe in their bank accounts. In the event, the government’s acquisition of the bank has acted as an insurance policy, guaranteeing that money in Northern Rock accounts is now very safe indeed. However, concern has continued regarding the safety of other banks, precipitated in great part by the proposed merger of HBOS and Lloyds TSB. As such, more savers than ever are worried that their money is no longer safe where it is.

Government Guarantees

In the first instance, it is important to remember that there is a statutory guarantee that covers deposits in a bank that subsequently collapses. The Financial Services Authority compensation scheme ensures that the first £35,000 in any bank or building society account will be returned in the event of the institution’s collapse. More recently, the Chancellor announced last week that this figure was to be extended to £50,000 with immediate effect. There are a number of clarifications that must be made, however. In the first instance, the scheme covers the first £50,000 placed by a depositor in each individual institution. The majority of banks are institutions in and of themselves, but the merger of Lloyds and HBOS is likely to produce one large institution. As such, if you have savings in both of these banks, the guarantee will soon cover only the first £50,000 of both accounts combined. Furthermore, while the scheme guarantees that your savings will be returned, this is likely to take some time. The scheme prioritises those for whom the collapse has caused the greatest financial hardship, but it could still be some months before you get your money back.

Further jitters about the apparently impending recession have recently led the Irish government to guarantee any money placed in an account with one of the six major Irish banks. The good news is that this guarantee is extended to non-Irish residents. As such, if your balance exceeds £50,000 you may consider moving it to one of these institutions.

Trackers

If you have money in equity funds or tracker ISAs, you are likely to have already seen a significant reduction in the value of your savings. As such, you may be considering moving your money before the possible onset of recession. While moving your money into safe investments such as gilts and bonds may be a sensible short-term move, you should give due consideration to the fact that the markets will, eventually, pick up. It is a general rule that, over any ten year period, money invested in a tracking product will gain value, even if it has momentary slumps. As such, if you will not need to cash in your investment for some time, you should seriously think about sitting it out as the potential for medium term growth remains high. Clearly, your choices in this field will depend entirely on your individual situation, and you should therefore make sure that you seek independent advice before taking any action.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • GREENY483
    Re: How Much Tax do I Have to Pay?
    I earn £50k a year in full time employment, last year I also made an additional £800 through other work, do I need to fill in a…
    18 September 2018
  • Soldier93
    Re: How Much Tax do I Have to Pay?
    Can i have a quastion? From this days i paid my tax every month i paid 70 pound. Now my boss told my i need to pay every week…
    16 September 2018
  • MoneyExpertise
    Re: How Much Tax do I Have to Pay?
    Lora - Your Question:Hi, My contract with my employer is through a freelancing website. Does this mean that I'm "employed" and…
    13 September 2018
  • dbexit
    Re: Will I Be Entitled to Redundancy Pay and How Much?
    Big company (1) with a lot of places of work closed one of it. There was no redundancy as employees…
    12 September 2018
  • Lora
    Re: How Much Tax do I Have to Pay?
    Hi, My contract with my employer is through a freelancing website. Does this mean that I'm "employed" and not "self-employed"?…
    12 September 2018
  • James
    Re: How Much Tax do I Have to Pay?
    Hi, I have earned £15,000 in this current tax year and have paid £2100 tax as PAYE; I am now switching to self employed. Will…
    7 September 2018
  • MoneyExpertise
    Re: How Much Tax do I Have to Pay?
    LJ256 - Your Question:Hi, I do 20 hours per week at minimum wage which equates to around 150 a week however I’ve been getting…
    4 September 2018
  • 123
    Re: A Guide to Unemployment Benefits
    Please could advise if employers are allowed to make your role redundant due to wanting to increase your hours? I work 90%…
    4 September 2018
  • Mike
    Re: Taxation for the Self-Employed
    Im registering self employment as of the 10th september 2018 i was wondering when i need to pay my yearly tax and NI bill will…
    3 September 2018
  • LJ256
    Re: How Much Tax do I Have to Pay?
    Hi, I do 20 hours per week at minimum wage which equates to around 150 a week however I’ve been getting taxed on this is that…
    3 September 2018