Isle of Man Savings Accounts

The Isle of Man as a jurisdiction has taken a battering in recent months because of the collapse of the offshore arm of the Icelandic bank, Kaupthing Singer & Friedlander on the island.  The investor protection scheme in place in the Isle of Man has been criticised for not offering enough protection to those who choose to place their money with institutions within the jurisdiction for example.

What’s more, the Isle of Man financial authorities have been called to account by many as they feel that they were not tough enough in terms of the regulations they had in place to prevent financial institutions from collapse.  So, are Isle of Man savings accounts worth taking a risk on, and why do so many expatriate financial advisers still recommend the jurisdiction to savers and investors?

We’re going to examine the Isle of Man and its suitability as an offshore jurisdiction for expatriate savers, revealing the truth behind the regulations and protection in place for those who do business through the island, and explaining why it is still so highly regarded by those in the financial services industry.

The Isle of Man’s government created a funding package to speed up the payment of compensation under the island’s Depositors’ Compensation Scheme for those affected by the collapse of Kaupthing Singer & Friedlander.  This in itself is positive because it has seen the repayment of some monies to those so deeply affected by the collapse of this bank.  However, the move has not been wholly supported by those affected because it is thought the gesture has eclipsed the real plight of those affected – namely the repayment of all their lost monies.  So, whilst the government has fulfilled its documented obligation swiftly and efficiently, it has so far not been able to force the complete return of all monies to those affected.

However, is it the Isle of Man’s government that is responsible for returning this money?  There are those who say that it is, because it has a duty of responsibility in terms of the institutions it licences to operate from within its borders.  However, there are those who understand that it is not possible to foresee every eventuality and to force all banks to operate a certain way and maintain a certain balance sheet – and that no other jurisdiction in the world operates in this way either.

So, is the Isle of Man a poor jurisdiction that has sold out those who have lost out from a single bank’s collapse?  Or is it just the unlucky jurisdiction that had to deal with a collapsed bank?  The truth is certainly in there somewhere – but it depends on who you speak to.  We fully, wholeheartedly support the KSFIOM Depositors’ Action Group – who wouldn’t.  These are people whose financial losses have devastated their lives in many instances – one cannot ignore these people.  Yet at the same time, we support the Isle of Man as a jurisdiction because they have done and are continuing to do what they can to protect those who place money within financial institutions on the island.

For example, the aforementioned Depositors’ Compensation Scheme is in place to compensate people if a bank fails.  If the affected individual has money in current or deposit accounts in the Isle of Man then up to £50,000 of net deposits per individual depositor or £20,000 for most other categories of depositor is covered with cover calculated per depositor, per deposit taker, if their bank fails.

What this effectively means is that you’re covered for a maximum of £50,000 per individual if a bank that you are saving with on the island fails.  Now this is a far healthier compensation offering than many other offshore jurisdictions have – which is part of the reason why some expatriate financial advisers still recommend the Isle of Man to expatriates seeking a tax haven for their savings for example.  However, the other reason for the island’s continuing popularity with those in the financial services industry is because it endeavours to comply with international rulings on the transparency of doing business, because it works hard to hold those who operate from within its borders to account, and because it is a staunch fighter when it comes to maintaining its exceptional reputation as a well regulated and trustworthy jurisdiction.

The institutions that make a home on the island have to comply with the Isle of Man’s high standards, therefore they are considered some of the best for expatriate savers by many financial advisers.  When it comes to your money however, you have to make the judgement call for yourself.  You need to look at any recommendations you’re given and see whether you agree and feel that yes, the jurisdiction favoured and the financial institution chosen for the enhancement of your wealth is appropriate for not only your risk profile but for your future financial security.  Don’t be afraid to question your adviser about the choices he has put forward for you – don’t be afraid to get all the information you need to feel comfortable before you commit to anything.