Banking Tips

With everybody looking for a safe haven for their cash, it’s not surprising that half of the new money flowing into NS&I (National Savings & Investments) is going straight into Premium Bonds. But is it the best place to put your money and if not, why are so many people buying Premium Bonds at the moment?

Basically, we all like a bit of excitement and Premium Bonds give you that when compared to other savings products. The great sell is ‘the lottery effect,’ the chance of winning a dream, and there is of course the chance of winning a million.

Your chance of winning the jackpot per £1 spent on the lottery is one in 14 million, far out-stripping the one in 18 billion chance of becoming a millionaire through the Premium Bond draw. But with Premium Bonds you are not gambling with your capital, you are just gambling with the interest.  So it’s probably doing it an injustice to compare it to the National Lottery.

Despite the FSCS Compensation Limits, people are still asking – “Are my savings safe?”. And quite rightly so, what with Northern Rock having to be bailed out and the Royal Bank of Scotland together with the Halifax having to merge with Lloyds TSB. Not to mention some massive US financial institutions hitting the rocks. Every sensible saver should be asking themselves, “Is my money safe?”  Well, here’s how it currently stands…

There is a statutory scheme called the Financial Services Compensation Scheme (FSCS), but it only applies to regulated financial organisations.

On July 1 2008, fast-track payouts were proposed by Chancellor Alistair Darling to help repair consumer confidence. He proposed that savers who lose money when a bank goes under will be given compensation within a week. He also aims to raise the amount of money protected from the current £35,000 to a new ceiling of £50,000. However, at the date of this post he has yet to raise this ceiling to £50,000 but it is likely to pass through parliament in Autumn 2008.