Ten years on from the great crash, just how safe is your cash today?

FORGET the Lehman Brothers crash, with sharp-suited bankers leaving swish offices clutching cardboard boxes filled with belongings.

For UK savers, the event that brought home the reality of the financial crisis in terrifying fashion ten years ago was when Icesave shut its doors.

On Tuesday, October 7, 2008, after a weekend of speculation, Icelandic bank Landsbanki, which ran Icesave, collapsed — leaving more than 200,000 British savers fearing for their cash.

Savers still carry the scars. And on top of this, they have suffered ten years of low interest rates, as those who’ve been most cautious with their money have paid for the excesses of City gamblers.

At the time, the limit for compensation was £50,000 per person — and in Icesave’s case, the first £20,000 was supposed to be covered by the Icelandic government. Many had committed far more than this based on a top interest rate of 6.3 pc; then-MoneyMail-reporter James Coney had his house deposit with the bank.

The panic led then-Chancellor Alistair Darling to declare the following day: ‘All Icesave savers’ money, not just up to £50,000, will be protected, including interest.’ Fortunately, everyone got their money eventually.

Now, with nervousness surrounding the stock market, many of us are keeping back cash, hoping to invest if share prices fall. But to make sure this cash earns a decent interest rate, we must sometimes choose from banks we’ve never heard of.

Top rates for easy-access accounts now include 1.4 pc from Coventry BS. For one-year fixedrate accounts it’s 2pc or a tad over, with Al Rayan Bank, ICICI, Atom Bank, Investec and a handful of others.

For every £10,000 of savings that’s an extra £180 a year in interest when compared with the poorest accounts, which can pay 0.2 pc or less.

The main question for many of us is: who on earth are all of these banks?

Atom Bank, for example, is a so-called challenger that is partowned by Spain’s second largest bank BBVA. Al Rayan is a Shariacompliant UK-based bank established in 2004.

ICICI is India’s largest privatesector bank, boasting assets of $172.5 billion in the past financial year, while Investec originated in South Africa.

Today, the Financial Services Compensation Scheme (FSCS) limit for cash is £85,000 in each institution per person, or £170,000 for a couple.

The limit rises to £1million per person for six months after significant events, so those selling a home don’t have to worry about spreading their cash among several banks or building societies.

The most confusing part for many savers is what counts as an institution.

For example, within Lloyds Banking Group, Halifax, Birmingham Midshires, AA Savings, Saga, Bank of Wales, Intelligent Finance and St James’s Place are all covered by Bank of Scotland’s licence, but Lloyds has a separate licence.

Full details are at thisismoney. co.uk/savings-compensation.

It’s also worth knowing that not all banks are covered by the UK scheme, FSCS.

For example, ICICI, Allied Irish Bank, FirstSave from the First Bank of Nigeria and Al Rayan Bank are all 100 pc protected by FSCS. But others operate under a passporting system with the European Economic Area, which means that you would need to claim from their home compensation scheme if they got into problems.

These include Agri Bank (Malta), Ikano (Sweden), Fidor (Germany), RCI (France) and Triodos (Netherlands). All EU countries must operate a €100,000 limit.

Spreading your cash around can create administrative headaches when it comes to keeping track of where your money is, as well as interest paid and tax due.

The first £1,000 of interest on cash is tax-free for basic-rate taxpayers and £500 for higherrate payers. The internet site Savings Champion has a free tracker service which allows you to register your savings accounts online. You can log in and see how much you are earning.

For those with large sums — say £250,000 or more — there is a feebased cash advice service.

Hargreaves Lansdown has launched Active Savings, which gives access to a limited number of fixed-rate deals. This aims to bring customers’ savings all under one roof to make administration simpler — just as investment funds can all be handled on one platform. The service provides savings alerts when rates change and savers are covered to the full £85,000 per bank.

Back in 2008, we had planned a Money Mail story warning savers that Icesave was in peril. Events swept past us.

The collapse came a year after a run on Northern Rock, and the Government was eventually forced to nationalise it in February 2008.

At that time, the leading credit rating agencies and the regulators were all giving Landsbanki a clean bill of health.

Ten years on, Gordon Brown, who was Prime Minister at the time, has warned that the world could be ‘sleepwalking’ into another financial crisis.

Maybe he’s right — or maybe he’s just become a grumpy old man. Either way, it is our cash and it is our duty to protect it.