According to financial experts, for many expats opening an offshore account is something left until after they move. However, once expats have arrived in their new country they find themselves busy with settling in and opening an offshore account falls down the “to-do” list.
This means savings stay in low return accounts, often with unnecessary tax being deducted, further eroding their value. As financial reasons are the driving force behind moving abroad, 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 once you live abroad, the vast majority of you can open your own offshore savings account with as little as £10,000.
What is an offshore account?
An offshore account is simply a savings account, but it is located outside of the country where you are living. Offshore accounts located in specifically designated overseas territories have a key advantage – 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. To have an offshore account you need to have left the UK to live or retire abroad. These jurisdictions offer many such accounts from high street bank and building society names.
5 reasons offshore accounts are useful for expats
If 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 costs – If you still have ties to the UK, a house you rent out or clubs to which you still belong, it’s a good idea to hold sterling in an offshore account. From this account you can pay bills, make gifts to your family or 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 in terms of interest rates. Gross interest means your balance will grow quicker, as all of your interest is added to your capital when it is paid to you.
3. Interest rates – Offshore savers can choose from a wide range of account types. It is common to 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 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.