Yellowtail Blog

We all know we aren’t supposed to put all our savings eggs in one basket, especially because of the limited protection against losses for savings deposits in the UK.

UK deposits in bank or building society savings products are covered by the Financial Services Compensation Scheme (FSCS).  FSCS is an independent body created by the Government to pay compensation if a financial institution is unable to pay claims against it.  Currently the first £35,000 per financial institution is protected.  So if you have more than £35,000 where should you put your savings?

One solution is to spread your savings around a number of accounts with different financial institutions.  With larger balances this approach becomes a little unwieldy.  For example an investor with £500,000 will need to open 14 different accounts to take full advantage of the protection offered by the FSCS.

An alternative approach may be to invest in a money market fund. A money market fund invests in a large number of short-term debt instruments on an investor’s behalf.  As an investor this allows you to diversify your savings and spread your risk, while offering competitive interest rates.

The money market funds we have researched in depth have all been given the highest triple-A ratings by independent credit ratings agencies.

You can read more about the benefits of these funds and how to invest in our Money Market Funds article written by my colleague Mushtaq.