Sterling news for expatriate savers
Wednesday September 20, 2006
Sylvia MorrisUnfortunately for expatriates, some of the best deals in Britain are off-limits to non-residents. The best rates on offshore easy-access accounts at the moment include Nationwide International?s Base Rate Tracker at 4.7%. Other top rates from 4.25% to 4.5% are no better than you can earn on telephone accounts from leading British providers. Anglo Irish Bank pays 4.5% on its offshore Easy Access account, but this compares unfavourably with 4.8% on its UK version.
If you can afford to tie up your money offshore for between one and three years, then you can earn 4.75% to 4.8%. Offshore operations run by Nationwide, Northern Rock, Alliance & Leicester and Anglo Irish Bank are among the top payers. The internet subsidiaries of building societies such as Yorkshire, Portman and Derbyshire, along with Bank of Scotland International, have also established a reputation for paying top fixed-rate deals.
So are fixed rates good value in the light of how interest rates are expected to move in coming months? Experts are divided as to where the British base rate will go from its current 4.5%, but it is not expected to pass 4.75%. Diana Choyleva, director at the economic consultancy Lombard Street Research, expects rates up at 4.75% in the second half of 2006.
But Professor Peter Spencer from the Item club, an independent economic forecasting group that bases its predictions on the Treasury model, expects rates to go down because of weak economic growth: ?I wouldn?t be at all surprised if the base rate fell to 4% by the end of the year.?
Offshore institutions also run ?deferred interest accounts? designed to help with tax planning. Interest is not added to the account until it is closed. The accounts are designed to appeal to people who are expecting changes in their UK tax position at a future date. For example, if you are a higher-rate taxpayer who will become a basic-rate taxpayer when you retire, you can take the interest once your tax rate has dropped. Nationwide, Britannia, Alliance & Leicester, Bradford & Bingley, Anglo Irish and Derbyshire offer these accounts.
Beware of the terms and conditions, however. For example, the Britannia Deferred International account, which is paying 4.8% on a minimum £25,000, will let you close the account only after it has been running for two years.
Most British expatriates hold savings in sterling rather than euros, for which rates are much lower. Nationwide pays 4.7% on its sterling easy-access account but 2.35% at most on its euro account. But 18 months of rising interest rates in the US to 4.25% have meant dollar accounts are becoming more popular, especially for those paid in the currency. Anglo Irish pays 4.8% gross on its US dollar fixed-rate bond against 4.65% on its sterling version. On easy-access accounts, however, sterling rates still win.
Top fixed-rate offshore sterling accounts*
One year %Alliance & Leicester Int £1,000 4.80
Northern Rock Guernsey £10,000 4.75
Two years
Anglo Irish Bank Isle of Man £5,000 4.75
Northern Rock Guernsey £10,000 4.75
Three years
Northern Rock Guernsey £10,000 4.75
Britannia International £10,000 4.65
*These accounts can be replaced at any time and with a new issue paying different rates of interest
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