If i remember rightly, if your savings provider goes bust you get the first £2,000 back in full and 90% of the next £31,000.

The appalling thing is that these limits have, as far as I know, been entirely static since they were introduced ages ago. So it seems very likely they will never go up in line with inflation etc. So what might be a relatively small investment now may still breach the compensation limit in say 10 years time.

Personally I just cant be bothered with worrying if a savings provider went bust. To have accounts with numerous service provider makes life very complicated and new accounts have to be continually set up to avoid future breaching of the limits. Anyway, when is the last time a savings provider ever went bust ?

Quite. Still, the FSA compensation limit is better than nothing, and I thought it had only been around for a relatively short time? Something like 2000/2001? I expect it will be increased in line with inflation in a future budget, as ISAs have been from April 2008.

But you're right, limiting yourself to savings accounts with only £30K is a pain, but not only that, it also wreaks havoc with the holy grail of compound interest. Therefore there's something of a risk / reward to keeping all your cash eggs in one basket. Still, in my opinion, unless you're saving for something in the near term (deposit perhaps) or are in a deflationary environment, it's normally better to whack the cash into the stock market.

My reasoning being that amongst other things that if you've managed to save over £30,000 there's a fair chance you're a higher rate tax payer and are getting stung for 40% tax on the interest or else 20% if you're on the basic rate if you're keeping your money in non-ISA savings accounts. Remember that 40% tax on the best savings accounts at 5.7% gross ends up at 3.42% net - barely keeping up with (CPI) inflation. The highest yielding companies in the FTSE100 yield more than that (~6%) and you don't pay tax on dividends (well okay, 25% div tax if you're a higher rate tax payer). And if you buy shares in an ISA wrapper you're safe from capital gains AND you don't have to declare those investments on your tax return. Previously the 25% div tax for higher rate tax payers was also waived in ISAs but unfortunately good old Gordie killed that off in 2004. Wonder what else he's got planned for stuffing people relying on divis? Hopefully he'll be out on his ear before he does much more damage.

Well, anyway, all this is assuming that I'm fortunate enough in the future that I have multiple pots of £30K -- or it's equivalent in the future -- to worry about! (this time next year, Rodney...)

Early 90's industry rumour had it one came within a whisker.

Yes also if you have many savings accounts, to make up the numbers, some savings accounts would probably have not very good savings rates.

Please enunciate more on your compound interest theory cos surely the outcome is the same if you had just one pot of money or a hundred pots of money but divided into hundredths.

Cash savings are more important than you think. Many of us are still feeling the scars of he dot com crash and got fingers badly burnt. The FTSE100 is still quite a long way behind its 2000 peak.

Cash savings are a buffer for emergencies etc. If you lost you job or became seriously ill, savings of say £50,000 would tide you over for a few years. It also means that if you have additional stock market investments you can leave them alone to grow untouched. Stock market investments should really be for the long term (10 years plus) as stock market crashes are not impossible.

Oops, you're quite right on the compound interest thing.

Well, it may have sounded like I was banging the stockmarket drum with particular fervour in my post but in fact at present 75% of my money is in cash and savings accounts. I got burned in the 2002 dip although I'm not talking megabucks as I was just beginning my working life, but it still felt like quite a loss at the time. So I do understand where you're coming from. I have savings sufficient to cover two years of frugal living without income.

I am growing my investment in high yielding big cap shares by my mini S&S ISA limit each year which I feel to be a reasonably cautious way of investing in the market. But if were richer I'd be investing more in stocks and taking full advantage of investment vehicles such as index-linked certificates, and so on.

Hey, if they were indexed to the savings ratio they'd have fallen!