Investments

Pension Bonds Open To Expats – But Few Can Apply

Expats should welcome Chancellor George Osborne’s extension to the massively popular pensioner bonds.

A little known clause in the rules lets expats buy the bonds providing they have a UK bank or building society account.

Many financial institutions have rushed to close these accounts if an expat does not have a UK address, but for the lucky ones who can still access a bank or building society in Britain, the full range of bonds is available.

Pensioner bonds are only on sale to the over 65s as an alternative to poor paying bank and building society saving accounts.

The National Savings bonds offer a 2.8% fixed rate on a 12-month bond and 4% on a three-year bond on a minimum £500 investment.

Tax residence fears

The interest is taxable, so expats would have to declare the income in the country where they are tax resident.

Other rules, such as US restrictions on savings products would not allow expats to buy the bonds.

“It doesn’t matter where the buyer lives as long as the laws in their home country allow them to have this kind of savings product,” said an NS&I spokesman.

“They will need a British bank or building society account which can receive BACS payments from us in their own name.”

However, these rules could preclude many expats picking up poor savings rates offshore.

One of the indicators of non-residence in the UK for tax purposes is breaking personal ties with the country – and having a bank account here is considered a personal tie by tax tribunals.

Massive popularity

Also, to gain access to an account, the expat must have a UK address, which is another personal tie for tax purposes.

Both these points mean an expat could undermine their non-resident tax status, leaving their income and chargeable gains subject to tax in the UK regardless of where they live abroad.

National Savings also require the bond investment to come from a UK bank or building society account in the prospective saver’s name.

So, investing in the bonds is OK for international workers aged over 65 who have a home and banking facilities in the UK, but probably rule out thousands of other expats who live permanently overseas and outside of the UK tax system.

Osborne has pledged to keep the scheme open for an extra three months after a rush to invest which has seen the NS&I Web site crash and jammed customer service phone lines.

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