Hints that interest rates could riseFollowing the financial crisis of 2008 when a number of big British banks came close to collapsing, the Financial Services Compensation Scheme (FSCS) was strengthened by the government. As such, the FSCS 100% guarantees the first £85,000 of a person’s cash savings per banking licence in total, including interest. This means that a couple with a joint account holding up to £170,000 will have every penny of this covered.
But what does ‘per banking licence’ mean? Simply put, one banking licence can cover a number of different banks, building societies or brands. It’s important therefore to spread your cash across more than one provider, as it could mean some of your hard-earned money isn’t as safe as you think in the event of a future collapse.
With that in mind, below is a list of the biggest banks and building societies in the UK and all the brands which fall under their banking licence. That means if you hold more than £85,000 across different brands but under the same licence, you could be in a position to lose out should the worst happen.
HBOS (Halifax/Bank of Scotland group):
- AA
- Bank of Scotland
- Birmingham Midshires
- Halifax
- Intelligent Finance
- Saga
Lloyds Banking Group*:
- Cheltenham and Gloucester
- Lloyds Bank
*HBOS was acquired by Lloyds Bank, but both HBOS and Lloyds Banking Group have continued to operate under separate banking licences.
TSB:
- TSB
Barclays:
- Barclays
- Barclays Direct (formerly ING Direct)
- Standard Life
- Woolwich
HSBC:
- First Direct
- HSBC
Royal Bank of Scotland (RBS)**:
- RBS
NatWest:
- NatWest
Ulster Bank:
- Ulster Bank
Coutts & Co:
- Coutts
**NatWest, Ulster Bank and Coutts are all subsidiaries of RBS, but have their own separate banking licences. As such, someone with accounts in each of these banks would be covered for up to £85,000 in each bank.
Santander UK:
- Cahoot
- Santander
The Co-operative Bank:
- Britannia BS
- Smile
- The Co-operative Bank
Bank of Ireland UK:
- Bank of Ireland UK
- Post Office
Clydesdale Bank PLC:
- Clydesdale Bank
- Yorkshire Bank
Sainsbury’s Bank:
- Sainsbury’s Bank
Tesco Bank:
- Tesco Bank
Virgin Money:
- Virgin Money
Nationwide BS:
- Cheshire BS
- Derbyshire BS
- Dunfermline BS
- Nationwide BS
Yorkshire BS:
- Barnsley BS
- Chelsea BS
- Egg
- Norwich and Peterborough BS
- Yorkshire BS
Coventry BS:
- Coventry BS
- Stroud and Swindon BS
Skipton BS:
- Chesham BS (renamed Skipton BS)
- Scarborough BS (renamed Skipton BS)
- Skipton BS
So, what about banks outside the UK? Whilst most banks which accept British savings are not covered by the FSCS, some within the European Economic Area are covered by their home country’s compensation scheme through the ‘savings passport’ scheme. One of the most prominent examples is Triodos Bank in the Netherlands, which is covered by the Dutch equivalent of the FSCS up to €100,000 per person. There are also some international banks which are covered by the FSCS, including:
- Axis Bank UK
- ICICI Bank UK
- State Bank of India UK
National Savings & Investments (NS&I) is also covered by the FSCS – but as it’s owned by the government, the expectation is that all deposits into NS&I (both up to and over £85,000) would be covered apart from in the most extreme financial circumstances.
Hints that interest rates could rise
Wednesday, February 14th, 2018Figures released at the end of January revealed that the final quarter of 2017 saw the economy expand by 0.5%. The Bank of England has now indicated that the pace of interest rate rises could speed up if the outlook remains positive.
Although Mark Carney and his colleagues voted to keep interest rates on hold at 0.5% at their latest meeting, they did indicate that the rates will need to rise “earlier” and by “a somewhat greater extent” than previously thought. As a result of the Bank’s comments, the value of the pound jumped by about 1% against both the dollar and the euro.
When the Bank put the rates up for the first time in ten years last November, it hinted there could be two more increases of 0.25% over three years, but it now appears there could be a third one and sooner than expected. There is speculation the next rise could come as soon as May.
As well as the growth in the economy, the growing numbers of people in employment have contributed to this belief. 32.2 million people were in work in the three months to November 2017, marking the highest total since 1971 when records began and a joint high record employment rate of 75.3%. Whilst average earnings increased 2.5% in the year to November, the growth of pay was below the rate of inflation for the tenth month in a row. The Bank does now think, however, that wages will start to increase.
If interest rates are increased, this will undoubtedly affect those households who currently have a standard variable rate or tracker rate. Of the 8.1 million households in the UK, approximately 50% are thought to be on this type of mortgage and interest rates would be likely to increase to match the Bank of England rates.
On the plus side, however, an increase rate rise would be welcome for savers as the High Street banks would generally follow suit.
Due to the boost in the UK economy, the Bank has raised its growth forecast 1.7% this year from the previous figure of 1.5%. It is worth noting, however, that this forecast is based on a “smooth” adjustment to Britain’s departure from the European Union. In the meantime, we wait to see what the Bank will actually do regarding interest rates in May.
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