It’s a question which has been put to Money Saving Expert founder Martin Lewis, during one of his appearances on Good Morning Britain last month. Answering questions from callers hit by the coronavirus crisis, Mr Lewis was informed by the viewer that they knew of people “clearing their bank accounts out and holding cash”.
- Nationwide FlexDirect: Savers can get 5% interest rate before May 2020
Responding to the query, Mr Lewis said: “Things are certainly safer in your bank than they are being held in your home, where any home insurance is protecting you, you usually get up to £1,000 in cash protection.”
The financial journalist also offered a brief explanation into the Financial Services Comensation Scheme protection and its limits.
And, during the current uncertain economic times, financial experts Old Mills have also shared some insight into keeping cash safe.
It comes after the Bank of England Monetary Policy Committee (MPC) successively lowered the Bank Rate from 0.75 percent to 0.25 percent, and then an all-time low of 0.1 percent.
The measures were taken in an emergency move to support the UK economy in the face of the coronavirus pandemic.
With the rate cuts being designed to make borrowing cheaper and to encourage spending, some may wonder what this means for cash savings.
Earlier this week, Nationwide announced changes to a number of its savings and current accounts, and this includes its FlexDirect online account – which until May 2020 offers new savers an interest rate of five percent.
Stuart Coombe, Chartered Financial Planner at Old Mill, has shared his thoughts on taking out money during the current crisis, advising savers not to make any rash decisions in the current market.
“While it may be tempting to move out of cash, it’s still the cornerstone of financial planning, and remains the safest place to keep your cash in the short term” he said.
“Keeping enough money easily accessible on deposit is a high priority for your financial security and this should be one of the foundations of your personal financial plan.”
It may be that cuts to interest rates leave some wondering whether they should switch up their current savings situation.
“We know it’s tempting to look at alternatives to cash deposits when savings rates are so low,” Mr Coombe said.
“And whilst we believe that investment portfolios will likely deliver better long-term returns, this is not a risk-free option and therefore moving funds from a very safe environment to one where capital is at risk needs to be considered carefully and as part of your longer-term plan.
“That said, for money you are prepared to take a long-term view on, with stock markets significantly lower than at the beginning of the year, this could prove to be an opportune moment to invest.
- Massive UK recession is ‘certain’ but tax hikes would be ‘DISASTROUS’
Like Martin Lewis, Mr Coombe also addressed the FSCS protection.
This included highlighting an important detail about the compensation limit – with this being that the limit only applies per person, per financial institution.
“The FSCS was established after the credit crisis is 2008 to protect savers if their bank goes under,” he explained.
“And it’s important to reiterate that the FSCS protects up to £85,000 worth of cash savings per individual (or business), per financial institution, which is not the same as per bank.
“For example, if you have savings of £85,000 or more with two different banks but they are owned by the same institution with just one authorisation e.g Halifax and Birmingham Midshires, you’re only covered for a total of £85,000.”
Mr Coombe has suggested all savers may want to consider a number of tips in order to give themselves peace of mind during these uncertain times.
1. Find out which financial institution owns your bank, he proposed.
2. Stay within the limit
“If you have savings with two banks under the same banking authorisation and your savings with those banks exceeds £85,000, it might be worth transferring the excess to an account with another bank, or use National Savings and Investments which have 100 percent protection as they are backed by the UK Government,” the chartered financial planned said.
3. Open a joint account
“If you don’t want to spread your savings across banks, a joint account with your partner will essentially double your coverage as the FSCS covers you per individual,” he explained.
4. Think twice about offshore banking
Mr Coombe warned: “Although the higher rates of interest may be attractive, banks outside the UK may not be covered by the FSCS.”
Source: Read Full Article