Banking reforms mean better savings protection

savings protection

savings protectionWe all know how important it is to save money, but just how safe is it? Thankfully, savers like us will soon be given greater savings protection, if a bank collapses, under much-anticipated proposals due to be announced by the Government.

The move follows last year's recommendations from the Independent Commission on Banking, and means your money will receive extra security. In the event of a bank failure, individual depositors would be placed ahead of bondholders and corporate creditors when it comes to recovering their cash.

Plans contained within the Government's set of proposed banking reforms also include ring-fencing depositor cash from riskier operations and investment banking arms.

Choosing the right savings account

Whether you are saving for a holiday, a new car or even just for a rainy day, it is important to choose the right sort of account and make sure you get the best savings rates available to you.

Easy access accounts allow you to deposit and withdraw money whenever you want. The interest rates on these types of accounts are variable, meaning they tend to - but do not always - move in line with the Bank of England's base rate (currently 0.5%).

Be careful with easy access accounts, as common catches include introductory bonuses, most of which only last for the first 12 months, after which time they expire. Minimum deposit requirements may also apply.

Fixed rate bonds allow you to lock away your savings for an extended period of time. These generally pay a fixed amount of interest over a set period. However, if you are likely to require access to your savings during this time then these may not be the types of accounts for you, as withdrawals will usually result in penalties.

Regular saver accounts pay a fixed amount of interest for a set term, with most requiring you to pay in a certain amount of money each month. Withdrawals will most likely be penalised, but the interest paid tends to be higher than on either fixed rate or easy access accounts.

Cash ISAs, on the other hand, offer easy access and the interest is paid tax-free, making your returns higher. It is important to remember that cash withdrawn from an ISA will still count towards your annual allowance.

So why not get your finances into gear and learn more about how to keep tabs on your savings accounts?