Is it time to consider offshore savings?
Skipton International has launched an offshore bond – a fixed rate bond which matures on 30 September 2020.
It’s paying a market-leading 1.50% yearly to those who have a minimum £10,000 to deposit, way above the next best offering: Leeds Building Society pays 0.85% on its two-year fixed rate.
The Skipton bond can be opened in branch or by post and can then also be managed by phone. Once opened, no further deposits can be made and there’s no access to the funds before the product matures.
It’s important to note that the first £50,000 per person or per bank/building society is protected by The Guernsey Depositors’ Compensation Scheme rather than the UK’s Financial Services Compensation Scheme (FSCS) which protects savings up to £85,000.
Given its market-leading status and the suppressed interest rates offered on other cash savings products, should you consider offshore bonds?
Offshore savings: an introduction
Offshore savings accounts allow UK savers to keep their money outside of the UK and they’re typically operated by subsidiaries of major banks, such as Skipton International and Skipton Building Society.
The accounts are usually run from the Channel Island, Isle of Man or Gibraltar and they can be set up even if you live and work in the UK. As such and as above, any money held in them will not be subject to the UK FSCS protection scheme, so data site Moneyfacts says it’s vital for savers to check if their money is protected by an alternative deposit protection scheme.
You must declare the interest gained on your offshore savings and HM Revenue & Customs is likely to impose large fines to anyone suspected of hiding taxable income.
Moneyfacts suggests that when people look for an offshore account, they should consider the same factors as those when looking for a UK-based product, such as whether you want to receive the interest monthly or annually and whether you want a fixed or variable rate.
Rachel Springall, finance expert at Moneyfacts, said: “The offshore savings market has condensed considerably over the years and many may be wary of investing due to media criticism of these accounts.
“So long as savers are aware of the risks involved and that they declare their savings interest, then these deals can be an alternative savings vehicle for any portfolio.
“However, as it stands, the interest available on the top best buy deals in the UK market are paying above the deals available for offshore and with the Personal Savings Allowance (PSA) in place, certain investors can take home more interest as it is.”