While it is understandable that many people are concerned about the security of their savings following the collapse of Icesave, Heritable Bank and Kaupthing Edge, it is important to note that there is no need for UK savers to be unduly worried.
Most Heritable Bank and Kaupthing Edge customers have had their accounts transferred to ING Direct, which is part of the Dutch banking giant ING, one of the world's largest banks. And even though Icesave's 300,000 account holders haven't been rescued in the same way, and are unable to access their savings at the moment, they will get all their money back.
As long as your savings provider is regulated by the Financial Services Authority and you have no more than £50,000 with a single institution (£100,000 for joint accounts) your money will be protected by the Financial Services Compensation Scheme (FSCS). For more information on the protection you receive under the FSCS read our articles How to keep your savings safe and Who owns who?.
There is therefore no real need to avoid foreign institutions. That said, in the current environment, some savers feel more comfortable investing their money with a domestic institution. So which providers offer the best rate? You'd think that this would be a simple question, but thanks to the global nature of banking today it's not.
UK providers that aren't UK banks
Take Bradford & Bingley for example, with its trademark bowler hats, an image that is as British as bulldogs and warm beer. But B&B is one of the victims of the credit crunch and its savings arm is now owned by Santander, the Spanish bank that owns Abbey and Alliance & Leicester.
Unfortunately, for those looking to "buy British" A&L and B&B offer two of the most competitive savings rates around: A&L pays 6.6% on its eSaver account, while B&B pays 6.51% on its Internet Saver 3 account.
A crop of other best-buys are also backed by foreign-owned banks. There is the Indian bank, ICICI, and the Nigerian-backed FirstSave account, both of which have continued to offer competitive rates to UK savers. There are also a raft of Irish banks - such as Anglo Irish and the Bank of Ireland, which is the brand behind the popular Post Office Savings Accounts.
Even Egg, which has recently vaulted into the best buy tables with upping the rate on its savings account to 6.55%, is owned by the American banking giant Citibank.
Leading rates from UK institutions
If you strip all these out of the best buy tables you may be surprised to find which institutions are left, offering the best rates. Topping the tree is West Bromwich Building Society, paying 6.56% on its Stratus account. Unusually for a high-paying account, this does not insist customers run their account online, as it can be operated by telephone, post or even in branches. Savers do need a minimum of £1,000 though.
Next there is Birmingham Midshires e-Saver account paying 6.52%; Scarborough Building Society pays 6.51% on its Balance Builder account while Tesco Personal Finance pays 6.5% on its Internet Saver.
Does the level of protection vary?
Here in the UK you get total protection if you invest your savings with National Savings & Investments and Northern Rock as both institutions are Government owned. However, you will sacrifice returns by opting for such a guarantee as their rates are not the best. In fact, NS&I has cut its savings rates for the second time in as many weeks.
You can also get total protection from Irish providers such as Anglo Irish Bank and the Bank of Ireland which runs the Post Office's savings accounts, following the Irish Government's promise to guarantee all savings until September 28 2010. However, there are question marks over the value of this guarantee because the Irish Government may not be able to afford to recompense all savers were its banking system to collapse.
And to be honest, you don't need an account that offers unlimited protection. The best way to guarantee your savings, if you have more than £50,000, is to spread your money between different institutions. Not only will all your money be safe, but you are also spreading the risk by not tying everything up with the same bank: if one of your savings providers collapses, you will still have access to the money in your other accounts and not be stuck until the compensation scheme pays out.
This also means you can maximise your returns and go for the best rates because as long as the firm is signed up to the FSCS, you don't have to worry unnecessarily about your bank's country of origin.
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