Offshore savings accounts - Should you open one?
Research shows time and time again that for the vast majority of expatriates, organising their offshore savings is often left on the “to do” list until after the move abroad, at which point inertia and amnesia taker over. Meanwhile, savings are left languishing in low return accounts, often with unnecessary tax being deducted, so eroding their value still further.
Yet for many, finance is actually at the heart of the reason for moving abroad. For some, going abroad is driven by the aim of saving more and within a shorter timeframe. For those retiring, enjoying a better lifestyle with lower living costs is the aim, so protecting the value of savings is vitally important.
Savings can take many forms, from simple offshore deposit accounts to more complex equity based funds and plans. At the core of everybody’s portfolio, however big or small, should be a simple deposit account for rainy days and emergencies. What many do not realise is that once they live abroad, the vast majority of us can open our own offshore savings account with as little as £10,000.
What is an offshore account?
An offshore account is simply a savings account like any other, but it will be located offshore, out of the country where you are living. Offshore accounts located in specifically designated overseas territories have a key advantage in that they are able to offer interest on savings which is paid before tax has been deducted. The Channel Islands and Isle of Man are highly regarded, well regulated jurisdictions which specialise in offering offshore accounts to UK citizens who have left the UK to live or retire abroad and they offer many such accounts from high street bank and building society names.
If you are working or retired and you have left the UK permanently and are no longer tax resident there, here are five reasons why you might want one of these accounts:
1. Day to day living. If you still have links with the UK, perhaps you have a house you rent out or clubs to which you still belong, you may well want to hold sterling in an account from where you can pay bills, make gifts to your family or just fund trips back to the UK without having to worry about exchange rates.
2. Boosting your savings. Holding sterling savings accounts offshore can often be beneficial for two reasons. Gross interest means your balances will grow more quickly, as all of your interest is added to your capital when it is paid to you.
3. The third reason is interest rates. Offshore savers can choose from a wide range of account types, so very often you can find an offshore account that is paying considerably more than the rate available on a standard UK high street bank savings account. Some offshore banks even write to their customers to advise of rate changes too, so the customer is in control – something that is almost unheard of with onshore banks.
4. It may be your only option: Once abroad you may find it very hard to open an onshore UK savings account. If you are no longer on the UK Electoral Roll, most banks will decline an application to one of their high street products, as you will fail their basic application test. Offshore banks, however, can accommodate a far wider range of customers from all over the world.
5. Stability and risk reduction: Some people do not want to hold all their savings in the currency of the country where they are living, whether this is the Euro or something more exotic. Sterling has always been attractive for UK nationals, but not all banks abroad offer good quality sterling savings accounts – Offshore, in the Channel Islands, there are a wide range of easy access, notice and longer term bond accounts available.
Wherever you are living, looking after your savings should be one of your top priorities. Skipton International Limited offers a range of easy access, notice and limited issue fixed rate bond accounts. Skipton International Ltd is part of Skipton Building Society, the fourth largest in the UK with nearly £14 billion of assets.
For more information on Skipton International savings products, visit skiptoninternational.com.