Could the Government help itself to the money in your bank account? It's probably unlikely, and in any event amounts below the guaranteed limit of £85,000 would surely be safe. So the steps to take if you are worried are the ones you would use to protect your savings in the event of a bank going bust. We explain how the rules work, and look at other "safe havens" for your money.
Know the rules
The first £85,000 held with a bank or building society in Britain is protected by a statutory scheme. So if your bank goes bust, the Financial Services Compensation scheme (FSCS) will give you your money back. For joint accounts the limit is £170,000. The limits are for the total amount you have with a bank; splitting between various accounts makes no difference.
Spread your savings
If you have more than £85,000, spread your money among separate banks, so that none holds more than that figure.
Are two banks really separate?
Some banks that seem separate actually belong to the same group, following a long series of mergers. If two banks are part of the same group, they will often – but not always – share a banking licence, meaning that only a single payment of up to £85,000 would be made by the FSCS. The graphic illustrates shared and separate licences for the big banks; for a complete list visit the Financial Services Authority's website via tinyurl.com/cbbhccc.
Watch for foreign banks
Banks from the EU are allowed not to belong to the FSCS, relying instead on the equivalent body in their home country. Very few banks – Triodos is one – currently do this; other foreign banks operating in Britain have subsidiaries that belong to the FSCS, so your money is fully protected up to £85,000. "Offshore" accounts offered by British banks tend not to have FSCS protection.
Remember NS & I
State-owned National Savings & Investments offers a unique unlimited guarantee from the Government. "Unlike other financial services organisations, when customers invest in our savings and investments they are lending to the Government," a spokesman said. "NS & I is backed by HM Treasury, so we can offer 100pc security on every penny invested."
Consider other assets
What other assets are safe from bankruptcy or government raids? Rob Burgeman of Brewin Dolphin said a client who sold his house for £1m at the height of the financial crisis had bought short-dated gilts as a safe haven, fearing that all banks were at risk. "At the time only £50,000 was guaranteed," he said. "If he'd kept the money in bank accounts he'd have needed to go to 20 different banks and check that they had separate licences." Gilts – loans to the British government – should be safe as confiscation would amount to a default. But returns are currently only about 0.7pc for a five-year gilt.
Gold is of course another favourite. But Mr Burgeman said: "Gold really has to be the physical stuff – bars and coins – if you want to be absolutely sure. Then you have the problems of theft and storage, and it's not very practical – you can't chisel off a little bit to pay for your groceries." And gold is not always easy to sell.
Could a government raid your gold holdings? "One can never say never," said Ben Traynor of BullionVault. "In our opinion, a good way to own gold is directly – not through a trust – in 'allocated' physical form, and offshore, in a place with a strong tradition for protecting international investors' property. This makes it a harder target for government confiscation, and one that could risk upsetting other countries for relatively little reward.
"There are many other sources of private property which are much easier targets for confiscation, including domestically held gold, and which would yield more value for less trouble."