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UK Government Banks

There are two banks that are owned by the British government, meaning they provide savers full protection on all savings deposits (with no maximum compensation limit) and therefore have a strong appeal for risk-averse savers.

These are collapsed building society-turned bank Northern Rock and the government's very own National Savings & Investments (NS&I).

Northern Rock

Northern Rock was in the headlines in 2007 after becoming the first UK bank to fail, leading to many customers queuing outside branches to withdraw their savings. The collapse was caused by its over-reliance on short-term borrowing from the capital markets. Fortunately for the lender and its customers the government came to its rescue and it was nationalised on the 22nd February 2008.

Since being taken into state ownership, the banks' savers have enjoyed unlimited Government protection, but the accounts open to new depositors are limited as the bank now risks reaching its saving limits and breaching its anti-competitive covenants.

The bank offers a range of savings accounts that include fixed-rate bonds, Isas and instant access accounts.

National Savings & Investments (NS&I)

Founded in 1861 as the Post Office Savings Bank, NS&I is a state-owned savings bank that currently manages around 10% (£72 billion) of the UK savings market.

NS&I remains a popular option with British savers as it guarantees all savings deposits and investment products are 100% backed by HM Treasury. In fact, the state-owned savings bank has reported a surge in applications in the wake of the turmoil surrounding the UK banking sector, with savers seeking safer banking alternatives.

NS&I savings products inlcude an easy access savings account and an investment account. Accounts can be opened at Post Office branches.