Offshore Saving

For the first time since the Great Depression Americans spent more than they earned last year which resulted in a negative saving rate of 0.5%...Britons weren’t far behind and were borrowing more, using more credit cards and releasing equity accrued on their homes to fuel their spending throughout 2005.

These trends cannot continue and sooner or later most people start to realise that they have to save for their future.  Offshore saving can be a great way for people to give their money an additional boost and to make their retirement or rainy day fund go even further, and because placing money offshore is a right that we all have here’s how you can potentially benefit from offshore saving.

As stated anyone and everyone has the right to place money or assets offshore no matter where in the world they live - and yes that does include people who live in the UK and the US as well – it’s the declaration of the action, or rather the non-disclosure of the action that can be illegal!  By placing money offshore in a simple savings account or investing in offshore funds or buying stocks and shares overseas it is possible to get greater returns, have access to strengthening currencies, receive gross interest payments and even enjoy better interest rates. 

But the majority of people who save or invest offshore have to declare what they are doing to their local taxation authority and have to pay annual tax on income and gains received.

Because income and gains received through investing offshore can potentially be higher than income and gains received saving onshore, most are ‘happy’ to pay the taxation due because without having gone offshore they would not have made such strong gains in the first place!

In recent years a growing number of South Africans have been benefiting from offshore saving at a time when their currency was depreciating in value.  By placing their savings into dollar, pound or euro savings accounts they were able to offset the depreciation of their own currency even though they had to then pay tax in South Africa on the interest earned on their savings.  For those in countries where the currency is weakening this can be a great way to give savings a boost.

For others saving offshore and getting interest paid monthly or quarterly before the deduction of taxation means that interest is effectively compounded and their savings and investments grow quicker annually as a result - the fact that tax is due on their interest payments is fine as it is only paid out once a year.

Certain offshore saving accounts offer regular lump sum investors more attractive rates of interest and terms of business than their onshore equivalent financial institutions, this can be another way to make saving and investments go further and achieve more.

To find out whether there are any savings or investment vehicles available offshore that suit you, your attitude to risk, taxation status and investment profile, you should speak to an independent financial adviser.  The information contained in this article is for information purposes only and does not constitute advice.

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