As a sensible saver, it is important to be concerned about the safety of your savings, and be knowledgeable about what to do in the worst situations in order to maximise on them. One of the most important factors to keep in mind is that the Financial Services Compensation Scheme (FSCS) is meant to protect your UK regulated savings or current account, as well as money in building societies, credit unions and cash ISAs. You will therefore be compensated up to 85,000 pounds, but any amount above this is not protected.
If you have a joint account, the protection amount is doubled, and half the amount in the account is your total risk. On the other hand, holding more than one account will not increase the protection amount; you will only get the 85,000 pounds as protection for all the accounts held in the same institution. Ideally, you should spread your savings and limit the amount to less than 85,000 pounds to allow for interest earned.
It is also important to note that not all savings institutions are regulated by the UK, so the FSCS protection may not be applicable to your particular institution. It is therefore important to find out what kind of protection the institution provides for savers. The FSCS only applies to those institutions that are regulated by FSA (Financial Services Authority). In addition, this protection only applies if the institution with which you have saved your money collapses, and not when the investment itself goes bust, like in the case of buying a fund that performs poorly.
If you have very large amounts that will make it tedious to limit your amount with each institution to 85,000 pounds, you could instead simply save with three or four different accounts that have FSCS protection. Although this may not protect you fully, you would get considerable protection from this. In addition, ensure that you have saved with the most competitive institutions that have little risk of going bust.
Another alternative would be to save with NS&I, the government owned bank that is fully backed by the state. If the bank was to go bust, the government would most likely step in to bail it out. This is probably the safest option for savers, since it is unlikely that the UK government would not be in a position to intervene. However, it is important to note that the investment products offered, such as premium bonds, generally have very low returns for investors.
It is also important to note that debts cost you a lot more than savings earn. Your priority should therefore be to clear all your debts before you begin saving to avoid your debts eating into your savings. You could also maximise on your savings by paying off your mortgage, since decreasing your costs is similar to earning on savings.
Purchasing a tax certificate would also be beneficial, especially if you are self-employed and have large tax bills. You will get to pay your tax early, which effectively means that you are saving money with the government.