The Irish government has taken the drastic step of guaranteeing all deposits in its six main banks in a bid to assuage savers fears over the safety of their cash.
Here in the UK, Gordon Brown has ruled out a similar move, promising instead to increase the current savings guarantee from £35,000 to £50,000 in the next couple of weeks.
In the face of such severe volatility in the finance markets, the most logical decision would seem to be switching your life savings across the Irish Sea.
Indeed, many UK savers appear to be planning just that, with a couple of the aforementioned Irish banks reporting a sharp rise in enquiries about their sterling accounts.
But don’t be too hasty, as you could end up sacrificing a large chunk of your interest.
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Rates as they appear on their sites
A quick perusal of the Irish banks’ websites shows that the rates on offer are nothing to get excited about (see table 1 below), with a number of the easy access accounts paying as little as 1% interest.
The notice accounts are better, especially Anglo Irish Bank’s offering, but in general they are well below the top paying UK fixed accounts (see table 3).
It’s also worth noting that the Irish savings guarantee only lasts for two years, so you would be wise to avoid any long term fixed rate bonds with these banks.
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Table 1: Best Irish savings accounts*
| Easy Access (AER) | Notice (AER) |
| Allied Irish Bank | 5.25% | 4.85% - 5.25% |
| Bank of Ireland | 1.00% - 2.75% | 5.26% |
| Anglo Irish Bank | 6.40% | 7.05% |
| Irish Life & Permanent | N/A | 3.97% – 5.89% |
| Irish Nationwide Building Society | 1.00% - 3.12% | 6.00% |
| Educational Building Society | 1.00% - 1.51% | 5.60% |
*Note that these rates are just a rough illustration, and not all are available on sterling accounts
Table 2: Best UK easy access accounts
| AER |
| Alliance & Leicester | 6.60% |
| CitiBank | 6.43% |
| ICICI | 6.16% |
Table 3: Best UK fixed rate bonds
| AER |
| ICICI | 7.20% |
| Firstsave | 7.10% |
| Icesave | 7.06% |
Table 4: Other guaranteed savings institutions
| Easy Access (AER) | Notice (AER) |
| National Savings & Investment | 1.85% - 4.40% | 4.54-4.80% |
Post Office | 5.75% | 6.75% |
So what should you do with your money?
If it’s purely security you’re after, then you should also consider National Savings & Investment here in the UK. The rates aren’t brilliant (see table 4 above), but your savings will actually be safer than the Irish options as the guarantee doesn’t expire after a couple of years.
The shrewd among you may have considered switching your funds to Northern Rock which, since its nationalisation, comes with a similar savings guarantee. Unfortunately, the institution has been inundated with new funds in recent days and has essentially closed its doors to all new savers.
Another option is the Post Office. Because it's savings are managed by the Bank of Ireland, you get the two-year guarantee and the rates are pretty decent (table 4).
However, if your goal is to earn maximum interest on your money without jeopardising it (which is a pretty good strategy in the volatile yet expensive times), then your best bet is to split your savings into £50,000 chunks and invest them in each of the top paying accounts.
Of course, it’s essential that each deposit is held with separately-owned institutions, thus ensuring each is covered by its own guarantee.
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Savings guarantee affects very few people
Amid all this talk of the government willing to protect “only” the first £50,000 in each account, I’m sure many readers will be left wondering what the big deal is. After all who, in this time of sky-rocketing costs, actually has that much lying around to worry about in the first place?
A survey by Alliance & Leicester last year found that around three in ten (29%) UK household have no savings whatsoever, while a further 42% hold less than £10,000. Given the general economic chaos we have endured this year, it’s highly likely their ranks have swelled.
In fact, even savers in the capital were below the £50,000 threshold, with an average saving of around £47,000. So clearly the guarantee issue isn’t relevant to everyone. But for those affected, it’s absolutely critical you act now to protect your funds.
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