How to Get the Best Offshore Bank Deal

Iain Yule works out which offshore banks are providing expats with the best and most consistent rates of interest

For a seventh year I have been looking back over the Nexus magazine offshore bank best buy charts to find out who has been offering the top rates of interest most consistently. In a low-interest rate environment generally it is especially important that expats find the top rates delivered regularly without being reduced when banks’ targets are reached. Loyalty to a bank should be rewarded and if it is not then you should move your account.

The results of this search of the last 12 months’ ratings as they appeared in 2010’s editions of Nexus are shown in the table.

In each edition of Nexus we print a table of the best buys currently available in offshore banking. We do this to assist expats in determining where to place any money they want to save in a tax-free environment at the best rate of interest possible.

But these tables of top rates are not the only story. They give a good snapshot of the accounts paying the top rates there and then. But high headline rates and introductory special offers on accounts make choosing the right one difficult. How do you know if today’s top-paying account is going to continue with a high-rate policy?

Of greater significance to savers, especially those who are in it for the longer term, is consistency of high rates of interest, and that is much harder to identify.

And that is where our ‘Best Offshore Banks for Expats Awards’ can assist. We have examined the interest rates paid by offshoots of banks and building societies based in the ‘sterling offshore’ area, which includes the Isle of Man and the Channel Islands of Jersey and Guernsey.

We looked for consistency of approach, signified by the number of times each offshore bank appeared in the best buys list published in each edition of Nexus, derived from research by independent data supplier Moneyfacts.

Awards are made in the categories of sterling instant access, sterling notice, dollars and euros accounts. There is also an overall award to highlight those offshore banks which have most often featured as best buys in different categories.

With interest rates so low, it is all the more important for savers to look out for those savings account providers which consistently offer better rates than the norm.

Best Offshore Banks for Sterling Deposits: Instant Access

Top bank in this category is Anglo Irish Bank in the Isle of Man. The bank’s Privilege range of accounts has been among the best buys throughout 2010 and is still prominent. The Privilege Demand account is currently paying 2.9% interest for holdings of £5,000 or more.

Highly commended in this category is Nationwide International, Isle of Man-based offshoot of the British building society. Its Base Rate Tracker Premium account presently pays 2.4% on deposits of £25,000 or more. Commended is Alliance & Leicester International in the Isle of Man, part of the Santander group.

Best Offshore Banks for Sterling Deposits: Notice Accounts

Alliance & Leicester International tops the poll in this category for its notice accounts. Its Select Offshore Notice 120 account pays 2.25% income on £5,000 or more held on 120 days’ notice of withdrawal.

Highly commended here is Bradford & Bingley International, also part of Santander. This Isle of Man bank currently pays the same rates on notice accounts as does Alliance & Leicester International.

Best Offshore Banks for Dollar Deposits

Winner yet again in this award is Anglo Irish Bank, with its Privilege range of dollar accounts consistently topping the tables in 2010. Privilege Demand account is currently offering 2.5% on savings of $5,000 or more, with no notice requirement.

Investec Bank in Guernsey is highly commended for its Horizon account, now paying 1% on deposits of at least $50,000. Alliance & Leicester International is commended in this category.

Best Offshore Banks for Euro Deposits

Yes, it is once again Anglo Irish Bank which tops the euro award. The Privilege Demand euro account is currently paying 2.9% for deposits of €5,000 or more, with instant access.

Highly commended Investec Bank paid consistently good euro rates in 2010.

Irish Nationwide is also highly commended for its euro rates.

Best Offshore Banks for Expats Overall

It will come as no surprise from the foregoing that for the seventh year running our Best Offshore Bank for Expats Overall is Anglo Irish Bank Corp (International). The bank has shown amazing consistency over the years. Deposits with Anglo Irish in the Isle of are fully protected by the Irish government until at least the end of June this year, according to Anglo Irish’s head of retail service & operations, Gary Quaggan. This goes beyond the Isle of Man’s own deposit protection scheme (see But is it Safe?).

Highly commended overall is Alliance & Leicester International, winner in the sterling notice account category, but also prominent for sterling instant access and dollar accounts. The bank is part of Santander, but has retained its own identity offshore.

Investec Bank in Guernsey is commended overall, due to its prominence in providing consistently good rates of interest on dollar and euro accounts.

* All rates quoted as at 5 January 2011. Please check current rates with product providers.

But is it Safe?

Offshore banks are useful for expats because they pay out interest without deduction of any taxes. But expats may think twice about saving with some offshore banks, given the collapse of two Icelandic offshore operations, even though bank failures are a very rare occurrence.

Kaupthing Singer & Friedlander went bust in the Isle of Man, triggering the island’s depositor compensation arrangement. But customers of the failed bank had to wait over a year before compensation of up to £50,000 per account holder was finally paid.

Customers with Landsbanki in Guernsey were not even as lucky as that, as Guernsey did not at the time have in place a deposit protection scheme. Those who had deposits with Landsbanki have lost much of their money, only receiving a proportion of what the liquidator can recover from the failed bank.

Here is what the three jurisdictions most commonly used by expats for offshore banking now have in place to compensate depositors should a bank fail.

The Isle of Man

The Manx depositor compensation scheme pays out up to £50,000 per person named on the account in the event of a bank failure. This means that both the people named in jointly-held accounts are compensated.

Guernsey

The scheme provides compensation of up to £50,000 per person per licensed bank, no matter how many accounts they have with that bank. The scheme will pay compensation within three months of a bank failure.

Jersey

Jersey’s relatively new scheme provides protection of up to £50,000 per person, per Jersey banking group, for local and international depositors. It promises that in the event of a bank failure an interim payment of up to £5,000 will be made within seven working days and the balance of compensation within three months.

Best Banks for Expats Awards 2011

The banks are ranked by the number of times their savings accounts appeared in the ‘best buy’ tables printed in the 11 issues of Nexus Expatriate News magazine during 2010 and at www.expatnetwork.co.uk. The banks appeared in the ‘best buy’ tables by virtue of having the best interest rate available at the time in the different categories of account (sterling notice, sterling instant access, dollar and euro) as judged by Moneyfacts. So we are showing which offshore banks offered the best interest rates most consistently during 2010. The ‘Overall’ award goes to the banks whose accounts have most often featured as best buys in different categories. Underlying interest rate comparisons by Moneyfacts (www.moneyfacts.co.uk).