Savers want UK safe havens for their cash

Problems with the eurozone and memories still fresh in their minds about the ‘Icelandic episode’ of 2008, which affected thousands of British savers who had their money in banks in Iceland, have made savers jittery about putting their money in accounts based abroad, according to the survey by price comparison website uSwitch.com.

Almost half of the respondents to the survey (48 per cent) said they were now less likely to place their money with a foreign-owned bank, while a quarter wouldn’t even consider it.

Instead, almost six in ten consumers (58 per cent) would prefer to keep their money ‘safe’ in British-run banks and building societies.

Even higher interest rates are not enough to tempt savers to forego the perceived safety of a British institution, with 59 per cent of respondents to the survey believing overseas or foreign-owned banks offer the most competitive rates, but 67 per cent believe it is important to keep their savings with a UK household name.

A few respondents went as far as to say that staying with a household name was their number one priority – 8.6 per cent, with more than 50 per cent saying it was very important or fairly important (30.7 per cent and 27.7 per cent respectively).

When it comes to choosing where to save or bank, consumers are looking for a safety net for their money above everything else – a huge 96 per cent want to know that their money is covered by the Financial Services Compensation Scheme and 96 per cent also want to know that the bank is financially secure, the survey says.

This is in spite of the recent failings by a number of UK banks and building societies, where some have had to be bailed out by the government and are now partly owned by the taxpayer.

Of the 67 per cent who said banking with a British household name is important, more than half (54 per cent) think it is safer to stick with a British-run institution, while four in ten (42 per cent) respondents believe that if things went wrong with a bank based in Britain, the government would step in.

More than half (54 per cent) are convinced that having insider knowledge of what is going on in the UK will help them to react quickly if they believe their money is in danger.

However, despite the extra caution, 44 per cent of consumers surveyed are not aware of how much of their savings would be protected should the worst happen and their bank collapses.

Fewer than half (45 per cent) know that foreign-owned or overseas banks have to be authorised by the Financial Services Authority to be automatically covered by the Financial Services Compensation Scheme.

Personal finance expert at 
uSwitch.com Michael Ossei said: “British banks have come to be viewed as ‘safe havens’ by cautious consumers as storm clouds linger over foreign or overseas banks due to ongoing problems in the eurozone.

“This is despite foreign-owned banks often offering some of the best market-leading rates, especially when it comes to savings, which in the past consumers would not have thought twice about taking advantage of.

“With the Icelandic banking crisis still fresh in many savers’ minds, it’s hardly surprising so many have concerns about putting their savings with an overseas bank.

“If you do bank or save with a foreign-owned bank, the most important thing is to find out if your savings are protected by the FSCS.

“If they aren’t, that doesn’t necessarily mean your savings aren’t protected.

“It could just mean that your savings are covered by a 
foreign government-run scheme instead.”

However, consumers should still ensure that all their eggs are not in one basket, added Mr 
Ossei.

“Although there is a strong perception that British institutions are the ‘safest’ option, consumers should take note of the ‘per bank’ rule and make sure that they spread their savings over as many savings institutions as possible – never holding more than £85,000 in each.

“With an influx of new entrants to the market and recent mergers and acquisitions, now is the time for savers to check that their savings are protected and avoid getting caught out,” Mr Ossei concluded.