Lock in to Headline Offshore Savings Rates But Not for Long!

No one knows which way economies and stock markets are going to go at the moment, history is writing itself with no help from analysts and those who predict the market for a living.  Interest rates are at an all time low in the UK for example, and people’s savings and investments have all taken a battering of late.

If you’re an expat you’re not immune to the economic knocks and bumps that impact our wealth, and according to Halifax International’s survey of expats, over 60% have witnessed a real and impacting depreciation in the value of their portfolios over the past year.

However, there is some good news, and that is that there are hot deals on offer from some of the offshore banks and financial institutions because they’re after fresh cash!  But our suggestion to you would be perhaps lock in to these preferential offshore savings rates, but not for long because if interest rates rise, you may well find you’ve locked in for less.

Before we begin we have to point out that we are not financial advisers and that before you take any steps that may impact your financial wellbeing, you should seek qualified and experienced, professional advice.

Virtually every leading financial institution had damaging exposure to the main aspects that contributed to the global financial crisis.  Whether they had toxic loans in abundance, exposure to Lehman Brothers or Kaupthing Singer & Friedlander or just too much invested in the UK, the USA or Western Europe, all have suffered from knocks to their balance sheets, with some suffering almost devastating and overwhelming shocks to their foundations.  As a direct result of all this, regulators are looking at brining more control and therefore stability to bear in the world’s financial markets, and meanwhile, financial institutions are bidding for investors’ fresh cash.

All banks need healthy books to keep shareholders happy and ensure their underling share value remains strong – therefore, if you have any money to save or invest right now, they want you.  However, they are not being especially giving and charitable in their bid to win your business because they feel they don’t have to.  As stated earlier, interest rates are at an all time low, therefore none of them are offering you much in the way of an incentive.  However, just occasionally you will come across an attractive rate of interest offered on a particular offshore savings account.

Usually you’re required to lock in to gain the best rate available – and for those who have cash on deposit that they do not need immediate access to, this can be one way to get enough return on your money to offset inflation and ensure it is growing at least modestly.  But…think long and hard about how long you’re willing to lock in for based not only on your own personal circumstances and how likely you are to need to get your hands on that cash at a given point in the future, but how long it is sensible to commit for.  After all, if you lock in for 5 years at 3% and interest rates rise in the next 2 years, you could be negatively impacted by having tied your cash up for too long.

The rules of the game are to look and see who is offering the headline rates, then examine the small print to see what conditions you have to fulfil to gain this rate.  If you can comfortably meet the criteria – such as, if you can lock in with no access to your cash for 12 months, consider the deal.  If however the small print, clauses and conditions are too restrictive, move on to the next deal.  Finally, once your cash is tucked up in an offshore savings account earning you nice interest, put a bookmark in your diary in advance of when you savings rate will dwindle away from the headline rate to the normal rate, and see what else is on the table then.

Of course – you could also consider roping a financial adviser in to the mix and getting them to do all the legwork for you!  What’s more, if you have your offshore savings and investments wrapped up in an offshore portfolio bond, when it comes time to move your money to a better rate of interest, you can do so with one fax transfer confirmation rather than a tonne of paperwork!

To find out if any of the solutions and products mentioned in this article might be useful to you, complete our offshore advice form and a professional adviser will get directly in touch with you.  Note this service is unfortunately not available for US citizens, those tax resident in the US and is only suited to expatriates.