Spread your money across different financial institutions

Savers who are nervous about entrusting their cash to a single financial institution and who still want a competitive rate of interest should consider a money market fund, says Fidelity International, manager of the UK’s largest and most popular cash fund.

Money market funds offer similar security and rates of return to cash deposits – the Fidelity Cash Fund currently pays interest of 6% net of fees – and also allow savers to protect themselves against the risk of a single bank collapse or default by spreading their money across a range of financial institutions.

The manager of the Fidelity Cash Fund pursues the best rate of interest on the highest quality notes issued by banks and other financial institutions. The fund is managed in a treasury style with a AAA rating, the highest credit rating in the market, and unlike some other cash funds has no exposure to riskier investments such as US sub-prime paper.

Money market funds, like any other UK mutual fund, are covered by the Financial Services Compensation Scheme. This provides a saver with a total maximum payout of 100% of the first £30,000 invested and then 90% of the next £20,000, should the company managing the client’s investments go into default.

Richard Wastcoat, UK managing director of Fidelity International, says: “Savers who opt for a money market fund have effectively hired an expert investor to seek out constantly the best interest rates in the market on their behalf. And what you see is what you get: there are no introductory rates and no lock-ins.

“Money market funds should also appeal to those savers who have been unsettled by the credit crunch. These funds spread a saver’s money across highly liquid cash-like securities issued by a wide range of financial institutions and top companies and so provide some protection from the collapse or closure of a single financial house.”