[tialaramex]

> In the UK at least retail bank deposits are guaranteed up to £85k per account, so there's a real incentive for the banking industry to police their member as if one fails, they'll all take a hit.

As you wrote it this doesn't make a lot of sense, so I'll explain, in the process I'll actually fix some errors too.

The UK government protects up to £85k per person per banking license. So if you have £40k in accounts at each of four brand name banks but they're actually all part of one huge corporation "Big Banks Inc." with a single license then the government only protects £85k total, 'cos that's just one license.

Unlike FDIC this is not insurance, instead it's a Last Man Standing system. If some banks fail, the government re-coups its loss over time from all remaining licensed banks. So for example if Santander fails, the costs of fixing that problem land on HSBC and other enormous banks. As indicated this produces an incentive to "police" your rivals because if you allow them to go under by not warning of risky practices, you're going to eat that cost yourself.

As an individual in the UK, if the £85k isn't enough you can invest in the NS&I which is a bank owned by the government. Unlike commercial banks NS&I isn't lending your savings to some unknown (to you) borrowers instead they're effectively lending everything to the government, which would otherwise need to borrow that money commercially (ie issue bonds) so it knows what that's worth. The rates aren't great but since it's owned by the government there aren't a lot of scummy for-profit shenanigans like "introductory" rates that then zero out unless you're constantly opening new accounts and moving your money. Since NS&I is owned by the government who also print the money your savings are denominated in, it can't go bankrupt. The money could become worthless, but in that case it doesn't really matter who you banked with and the whole country is fucked anyway.

[gpderetta]

Also for some NS&I accounts interest is tax free because technically they are lottery (although with a relatively predictable return for large savings).

Mind, the interest is currently so low that it doesn't really make much of a difference.

[tialaramex]

The rationale for Premium Bonds isn't really the tax it's the fact that people like gambling.

It turned out that persuading Aunt Sally to buy the new baby £100 of investment that will earn interest and might be worth something when the baby goes to college is hard - whereas Aunt Sally is much more interested in buying the baby £100 of scratch-offs with a tiny chance it wins big but most likely it gets nothing. This is before scatch-offs were legal in the UK as they are now but NS&I tweaked the numbers to offer a product that is (from their point of view as a bank with many savers) just a bond, but from the individual saver's point of view works like a lottery.

https://www.nsandi.com/products/premium-bonds

[Closi]

It’s often the tax, my parents have premium bonds and cite the tax benefits as they have maxed their ISA.