The complexity of savings accounts

A few days ago I wrote an article about finding a fixed rate savings account with a competitive rate of interest. Not rocket science, you'd have thought - but it's certainly not that straightforward either.

For a start, some price comparison websites are fond of listing 'best sellers' or 'sponsored products' above the best buys and they don't always compare like with like (some websites exclude deals that come with short term bonus rates while others don't etc). The upshot is that you have to take the time to look at two or three different price comparison sites to be sure of getting the best deal.

Next you have to look at the catches - are you tied into taking out a bank account or investment product with the bank or building society in question? For example, Santander has one year bond paying 4.5%, which is head and shoulders above the rest. Look a little closer and you'll see that you have to invest the same amount as you put into the bond into a 'qualifying investment product'.

It might be the case that Santander's investment is the right one for you, but you shouldn't take out an investment product on the basis of a good rate on a linked savings account - not unless you've checked out the investment product thoroughly.

But it's not just the conditions and catches that you have to watch out for - there's the issue of safety as well. After the shock of the credit crisis most of us a bit a wary about chasing the highest rate without knowing how our savings are protected but finding out how you might be compensated should the bank fail isn't exactly straightforward either. I was trying to cut the explanation down to a couple of short sentences, but it was a struggle.

There is one set of rules for banks based or operating in the UK, another for those headquartered in the EEA, which means that banks based in the EEA can top up so that they offer the same level of protection as banks based in the UK if they want to but they don't have to.

And what about banks in the UK that are owned by the same parent company? Well, in some cases they may share a banking licence with the parent company in others they may not and the amount of your savings that are protected by the Financial Services Compensation Scheme are linked to the way the bank is licensed, not its brand name(your savings are covered up to a limit of £50,000 per banking licence).

I appreciate that banks and building societies will want to compete with each other for market share and that the savings safety scheme was put together when the banking landscape was far simpler. But the fact is that many people feel - understandably - bewildered about making what should be a relatively straightforward decision.

Financial services companies often bemoan the fact that people in the UK aren't very engaged with their finances - particularly long term savings. Perhaps it would be easier if the process of picking a savings account wasn't so complicated.