What kind of loony keeps more than £35k in savings accounts with a single bank?
NB if you’re reading this and you have more than £35k in savings accounts with a single bank, you should immediately transfer the balance over £35k to a different bank. There is no sane reason not to do this, and it’ll save you from having to spend your Saturday in comedy queuing lemming mode next time there’s a bit of a liquidity fuss…
7 thoughts on “On that whole Northern Rock thing”
Not questioning the logic, but why exactly do you choose £35k as your cut-off point? why not £15k? why not £50k?
Because below £35k, all bank deposits in the UK are 90% guaranteed by the Bank of England (i.e. even if the bank goes properly bust and isn't baled out by anyone, you'll get 90% of your money back), whereas above £35k there's no such guarantee and you're just another unsecured creditor.
Aaaaaaah. Never knew that, and it's very definitely worth knowing. Probably best to consider £30k to be the sensible level, so you don't get paid interest that pushes you over the limit at an inopportune time. That would suck; "we've paid you your £80 interest for this month to bring your balance to £35,010 so now you lose EEEEVVERYYYTHHIIINGGG! Aren't we kind?"
That would be funny, but I'm fairly sure it's done like tax rates rather than stamp duty – i.e. you get 90% of your money below £35k and lose all the money above it. Which would still be annoying (there were some people on t'telly at the weekend who had £1m in the Northern Rock. You just wanted to shake them and say "you've got A MILLION POUNDS, *IN THE BANK*? HIRE A FINANCIAL ADVISER FFS!")
Yeah, I couldn't agree more. My wife suggested that maybe these people have a million quid invested in something better than a standard savings account. In which case they're still fucking stupid, because you mostly can't just wonder up and withdraw money without notice for that sort of account.
Although now, a few days after this post, it seems like the government has basically agreed to guarantee any savings account.
I'm not sure (and can't quite be bothered to research) whether NR offers investment funds, but in any case these are normally held in separately owned vehicles which are not legally accountable for the company's debt [i.e. Dave Smith is an investor in Mike's Bank Asian Investment Trust #6, which is a legally separate entity managed by Mike's Bank so if Mike's Bank goes bust then MBAIT just needs to find a new investment manager…]
Also, I can't help but feel you're just using this comment as an opportunity to refer to Mrs Mat as "my wife". Which is fair enough; I'd do the same in your position…
IF you are in the fortunate position of having £1 million cash to deposit, you need about 33 different bank accounts to cover your deposits! If a bank loans you, say, £1 million, they require collateral for that amount; if you loan – ie deposit – £1 million to the bank, they give you collateral of just that £35,000 per deposit. A joint account would give you £70,000. But if you have £35,000 each account in, say. Intelligent Finance, Saga, Birmingham Midhsires and Bank of Scotland . . . guest what? You STILL get only £35,000 coverage. Reason: They are all part of the same group.
Bank deposits in this form are clearly one of the biggest cons going.
Why don't insurance companies offer a deposit insurance, as they do in some countries – but NOT this one! If the risk of a major UK bank going bust is so small, then this is a win win situation for the insurance companies because they would always collect premiums but never pay out. If this is the case, why don't they offer such insurance? Reason: Maybe the risk is greater than they tell us, otherwise insurance would be in place.