New research suggests that since the 2008 credit crisis many older savers are choosing the safety of their deposits instead of top interest rates.
Personal and business bank account experts are unsure what is driving the reluctance on the part of older savers. Some have stated that the lingering fear of another economic crisis may be driving the behaviour while others believe savers lack working knowledge of the government’s Financial Services Compensation Scheme, the UK’s savings account safety net.
The FSCS protects a high percentage of cash ISAs that are offered in the UK. The scheme repays up to £85,000 in cash deposits held at any bank or building society that fails. Several foreign safety schemes are also approved for repayment under the FSCS.
Research shows that the most savers could possibly have in their ISA accounts would amount to £70,000. Moreover the only way they could have done so is to have made their maximum allowance deposits annually for the last 12 years.
Despite this, the FSCS discovered that many savers will still gravitate towards accounts that they feel are more financially stable in lieu of those that offer lucrative rates of return. Those over the age of 45 were found to be much more cautious than other age demographics that participated in the research study.
For those above the age of 65, 40 per cent of respondents stated that coverage by an official compensation scheme was the most important factor in their ISA deposit decision. Industry experts say that while such an attitude may be sensible, with the vast majority of ISAs covered by FSCS such a factor needn’t be considered so carefully.