Offshore banks and building societies are inflicting more financial misery on expat savers as they drop rates and close off account options.
As offshore banking opportunities shrink, expat savers are now losing money compared with rates offered to onshore savers.
With rates hovering around 2% gross for offshore savers, and returns dropping all the time, the future looks grim for expats looking for a decent yield.
For those willing to lock up their cash for five years, the best current deals are:
- Permanent Bank – 1.92%
- Norwich and Peterborough Gibraltar – 1.9%
- HSBC’s headline deal is 2.04% gross, but comes with demands for customers to open a current account and a minimum £25,000 deposit, which is beyond the reach of most small savers.
The current crop of deals looks very much like offshore banks cherry picking the cream of expat savers who have a significant amount of money to tie in to modest rates.
Falling rates
Five-year rates have halved in just two years.
Winding back the clock to 2011 would see Clydesdale International, which has left the market, offering 4.15% to offshore savers.
The wind change is the British governments Funding for Lending scheme, which has removed the need for banks and building societies to raise deposits to underwrite cash to lend.
Banks and building societies are not only pulling their five year deals. Three year terms are scarce.
The Permanent is again at the head of the pack with 2.15%, while the Nationwide’s offshore arm has a 1.8% offer.
For 12-month rates, Permanent again heads the rates with 1.85%.
Lack of choice
The problem for offshore savers is the banks know October is a prime time for saving terms to mature and understand savers are looking around for new best deals to place their cash.
The suspicion is the financial institutions are taking cynical advantage by lowering rates and limiting choice because they know these savers with piles of cash have nowhere else to go.
The rates on offer are also no better than inflation, so even the moderate returns are not keeping pace with spending power for expats. With inflation and income tax, expats are paying out of their savings for the privilege of lodging their money in an offshore account.
Not only that, but with the advent of tax reporting agreements between British offshore territories and Crown Dependencies, managing expat accounts is becoming more expensive for the banks and lowering margins.
