The Financial Services Compensation Scheme
Q. What happens to my savings if my bank goes bust?
MPs have been expressing their dismay that so few people are aware of the compensation scheme for UK based savings, which they believe could help to restore public faith in savings accounts.
A recent poll has shown that MPs would prefer it if financial bodies were required to tell consumers about the Financial Services Compensation Scheme protection when selling relevant products and services.
To some degree, it’s in banks’ best interests to make sure that consumers feel at ease about the security of their savings – unless the bank is Passport protected or the customer has a large volume of savings at their disposal.
But as Secure Savings and Compensation is one of our favourite subjects – exemplified by an editorial, a savings guide, and a healthy proportion of the main saving account page – we are glad to oblige in spreading the word again.
A. The Financial Services Compensation Scheme
TBC
Nationwide Vs. Santander: Clash of the Titans
Blue vs. Red. It’s difficult not to see political allegory at play. And yet, the titanic struggle between the two banking giants, Nationwide and Santander, is no less relevant nor signficant for a nation of consumers desperately trying to consolidate their finances.
Banks often face a barrage of criticism for lack of loyalty to their customers. Yet they also face a grilling for offering products solely to existing customers.
There’s no easy win in this situation, but it has persuaded banks to think more carefully about how their products work together. There are no better exponents of this than Santander and Nationwide.
ISA Deadline Day Looms
The fascinating war waged between ISA providers is set to come to an end as the tax year draws to a close.
Ahead of the Thursday 23:59 deadline, what can savers do in this final week to ensure that they maximise any of their remaining tax-free allowance for this tax year?
New Cash ISAs
Savers are only able to pay into one cash ISA in any tax year. Those who have not already paid into an ISA during this tax year have a small window of opportunity to open a new ISA.
ISAs: Last Minute Decisions
Research shows that there’s a lot of money left to pour into cash ISAs before the door slams on this tax-year.
And, according to high-street banks Santander and Halifax, the vast majority of savers now prefer the stability of fixed-rate ISAs – even at the sacrifice of access to their cash – to the slippery variable rates offered by instant access ISAs.
The vexation that cash ISAs products have created in recent weeks makes this revelation unsurprising. Contending with transfer regulations and different bonus rates has undoubtedly tested savers’ patience and goodwill.
“We have seen a stark shift in savings behaviour in 2012 with customers primarily opting for fixed rate products over variable rates”, explains Richard Fearon, Halifax’s Head of Savings.
“It’s not surprising to see that many savers prefer the certainty and peace of mind that comes with a fixed rate of return”, says Matt Hall, Santander’s Head of Savings.
This is particularly notable because the instant-access ISAs offered by these two banks in particular – part of what I’ve recently termed “the old order” – seem designed to steer customers in the direction of fixed-rate ISA products.
ISAs and Invective: A Hiding to Nothing?
Over the last few weeks, I’ve been circulating regularly to keep myself informed about all the recommendations for the new ISA season, conscious that Which4U has been sporting a different approach to most other financial and media outlets.
I’ve also caught sight of those hard-to-miss stories about trolling. I’m not suggesting that it’s particularly prominent in the nondescript field of personal finance, but it has been interesting to note the abrasive nature of public response to ISA reporting – especially across the tabloids.
A number of readers are choosing to interpret the attention given to ISAs as a personal affront to themselves and/or others who don’t amass thousands in savings. And vented fury against banks often becomes an impromptu personal invective.
The disdain towards the financial system is understandable. There’s numerous reasons for concern:
Cheshire Draws Swords with Santander over ISAs
Previously, on IS4
- 27-02-12: Nationwide leads the way, at 3.10%.
- 02-03-12: Cheshire strikes the front, at 3.16%.
- 05-03-12: Santander’s new rates reach 3.30%.
- 08-03-12: Cheshire is poised to re-take the lead at 3.35%.
The battle over ISAs has taken another development as the Cheshire Building Society, parented by Nationwide, re-raised its instant access cash ISA rates to 3.35% to seize the initiative back from Santander.
It seemed like Santander’s ‘Promethean’ revelation of its latest ISA rates would prove to be the last word on the matter – at 3.30% AER for the instant access cash ISA and 4.00% AER for the two-year fixed-rate ISA. But Nationwide and Cheshire were not ready to surrender there and they have struck back with interest.
The ISA Contagion
There’s a new contagion going around during ISA season. It’s called longevitus. And it’s catching fast.
As it stands, the usual game of cat-and-mouse is taking place as banks continue to snare UK savers seeking the right home for their tax-free cash ISA allowance.
Some banks have declared their rates early, hoping to tempt savers into an early decision. Others have paused, observed their rivals, and tried to usurp them with Promethean intent.
As more reveal their sparkling new ISA products, there is a distinct pattern emerging which differs from the recent past. Few institutions are still banking on a one year plan. The assumption must be that consumers are not thinking this way either.
Santander 123 Current Account
Santander’s reputation for lateral thinking and adding creativity to the marketplace precedes them.
Last year, they released an up-front interest bond which was proudly self-fashioned as ‘revolutionary’. This year they may be on the trail of something similar as they come to launch the new Current Account on Monday.
The market for current accounts has grown stagnant in recent years. Focus has now switched almost entirely to overdraft facilities, to the point where most active current accounts do not offer any interest at all.
The new 123 current account breaks the mould by returning the attention back to interest, while also offering cashback, a feature not usually associated with current accounts.
Best Cash ISAs
Which is Best? How do I choose?
All UK citizens have access to a ISA (individual savings account) allowance. Cash ISAs is a type of ISA which holds cash, you can deposit up to a certain amount into it and receive interest tax free.
Cash ISAs were first introduced in 1999 to replace other tax-exempt accounts. They were created to be available to a wider range of people and more accessible. They have changed considerably since 1999. Notably, several variations of cash ISAs have since outlived their worth or else been scrapped.
When looking for a cash ISA it is important to check how they will perform after the first year, when rates can fall away. Checking through ISAs to see which is best in the long term can be a daunting task. Fixed-rate ISAs will guarantee a rate of return, but offer severe interest penalties for withdrawal. For instant access cash ISAs, see our post on how ISAs perform after one year to help you understand the best long-term options.
Changes Regarding ISA’s – Good News or Bad?
Although only introduced in April 1999, individual savings accounts (ISA’s) are now a huge part of our everyday lives. The majority of the nation should be able to vaguely explain what one is, with the remainder of the population going as far as being able to give advice about where to get one, which ISA is the best on the market and even being capable of knowing what ISA stands for; but not too many people could go into great detail about the specifics surrounding ISA’s, how they’ve changed over time and what this means to different salary bands.
ISA’s are constantly evolving and change over time, but is this good news for the account holder or bad news? It’s dependent on their income. The good news is, regardless of how much or little you may know about ISA’s, HM Revenue & Customs‘ (HMRC) statistical release late last year, offers evidence to suggest that ISA’s are in fact becoming bigger and better which will only become beneficial for the account holder – but here’s the catch – only if they increase their monthly instalments being paid into their ISA. It is of the opinion of the account holder whether this is good news to them or not and it will likely depend on an individual’s personal circumstances as to their opinion on the matter.
I will explain my findings, but firstly, if you are of the majority with little knowledge about ISA’s, we’ll go back to the drawing board and explain what an ISA is and then explain how they are changing for the better, or worse.