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Offshore bargains

Friday February 9, 2007

Helen Pridham

The ever increasing popularity of offshore investments means it is as vital as ever that expats check the market for the best deals. This is particularly important if you are an expat who has financial commitments in the United Kingdom or you want easy access to your money in your current location, which means you need an offshore current account that provides a cheque book and a debit card. Interest rates paid by the main UK high street banks on credit balances in their offshore current accounts are not particularly attractive.

On the savings front, there is the choice of instant access, notice and fixed rate accounts. Most accounts are open to both UK residents and expatriates, though some are restricted to expats only. Currently one of the most competitive instant access accounts which is open to all is Zurich Bank International?s recently launched Reward Account paying 5% gross on balances of between 5,000 and 1 million.

Another option is a tracker account, where the rate moves in line with Bank of England base rate. Zurich?s account does not describe itself as a tracker but it is guaranteeing to pay 0.25% above bank base rate until 30 June 2007, and no less than 0.25% under base until January 2010.

Besides looking for a good rate it is also important to check how and when you can access your savings without suffering an interest rate penalty.

For expats only, one of the most competitive deals at present is Bradford & Bingley International?s internet operated eAccess account, which is currently offering 5.35%. This includes a 0.4% bonus which finishes on March 31, 2007. Unlike many other offshore accounts, Bradford & Bingley?s minimum is only 1,000 and there is a regular savings option.

It's a good idea to have a regular savings option. With the C&G Guernsey?s 60-day notice account investors can receive their interest paid monthly into their bank account at a rate of 4.89% on 10,000.

Landsbanki Guernsey, the Icelandic bank, is now offering the same monthly income deal as C&G Guernsey. But on 90-day notice accounts it beats rivals by offering 5.21% on 10,000.

Ordinary UK savers don?t stand to gain much by saving offshore because they will still have to pay tax on the interest, but there are some accounts that defer interest payments. This allows you to postpone taking the interest until you are retired or have moved abroad. However, the only drawback is that as the interest is not added to your account there is no compounding effect.

Foreign Promise

Many of the larger banks and building societies also offer offshore savings accounts denominated in euro or US dollars. If you are an expat and most of your outgoings are in one of these currencies, it will help to reduce the risk of adverse exchange rate movements if you keep at least part of your savings in your local currency.

However, a savings index monitoring the rates on these accounts compiled by Investec Private Bank shows an even greater need to shop around. Anna Malcolm of Investec says: ?While the interest rates on sterling accounts are usually competitive, our indices show the rates on US dollar and euro accounts are less likely to keep pace with movements in US Federal Reserve and European Central Bank rates.?

With its 90-day notice Horizon account, Investec guarantees that rates will not fall below central bank rates and is currently offering 3.35% on minimum deposits of ?50,000, and 5.45% on $50,000.

Money Observer

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