Where should I keep savings to pay for care bills?

I have a lasting power of attorney for an elderly relative and they have moved into a residential care home. If their house sells I am told I should split the money between bank accounts, with no more than £85,000 in each. This would mean opening at least four accounts. I imagine this will be a long and tortuous process. Is there a simpler approach?Chris, Kent

Managing the finances of an elderly relative can indeed seem daunting, especially when it involves handling large sums of money. And you are right to be aware that if you are keeping the money in cash, you may need to open multiple savings accounts to make sure that it is all protected by the Financial Services Compensation Scheme (FSCS).

The FSCS protects up to £85,000 per person, per banking licence for cash savings and current accounts, and up to £170,000 for joint accounts. This means if your bank, building society, or credit union goes out of business, you could claim up to this amount. But although you have power of attorney, this doesn’t mean the cash is being held in joint names — you are simply looking after it for your relative — so you can’t double up on the protection per account.

Unfortunately opening a savings account with a power of attorney can be a little more convoluted and difficult, and the journey does vary between providers. There is certainly more administration because the attorney or attorneys will need to supply proof of address and identification, as well as the donor, plus supply certified copies of the power of attorney itself.

Often you will also need to apply via the post or in branch. So, opening multiple accounts can be undesirable, but still important because you should be acting in the donor’s best interest at all times.

While it can be a cumbersome task to open multiple accounts, there are a couple of ways to streamline this process.

One effective approach is to use cash savings platforms. By signing up to one of these platforms you can spread funds across several accounts without the need to apply to each bank individually, while helping you to stay within the FSCS protection limits.

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A single application on to the platform allows you to view and manage all your savings accounts; you can easily find competitive interest rates, move money between accounts and monitor the overall performance of your savings, without juggling multiple logins and statements. This simplifies the management process and allows you to focus more on your relative and less on the complexities of financial administration.

Platforms such as Insignis Cash and Flagstone offer access to a wide range of savings accounts from various banks — and you can do this with a power of attorney. Some platforms, such as Raisin, will allow you to apply only as an individual — not using a power of attorney — so you need to find the right option for you and your relative.

Another way to reduce the number of accounts you may need to open is to use National Savings & Investments (NS&I). Any cash deposited with NS&I is backed by the Treasury — not limited to £85,000 — so you could simply open accounts with that one provider. However, due to this unique protection, NS&I will often be far less competitive, so you could earn much more interest elsewhere.

Anna Bowes helped to set up the consumer website Savings Champion in 2011 and has worked in financial services for more than 30 years.