Expats keep the faith in offshore banks despite poor rewards
Offshore bank accounts have kept their popularity among British expats with nearly half holding these accounts for their savings, The Telegraph reports. Alternatives such as offshore savings plans are held by only one in five expats while less than one in 10 chose to invest through offshore insurance bonds.
These findings from research by AES International, an international financial services organisation, suggest that offshore bank accounts have not lost their appeal, despite some safety scares six years ago, such as Icelandic bank collapses, which affected savers with their offshore arms in Guernsey and the Isle of Man.
The banks also remain popular despite much publicised clampdowns on tax evasion, a shrinking number of providers and worse interest rates paid than on similar onshore accounts.
John Viney, chief operating officer at AES International, said: “I agree returns are low on offshore bank accounts but they are useful for holding cash intended for investment. I think that holding a good offshore bank account in a safe jurisdiction is very important for expat financial planning.”
Mr Viney warned that many regular savings plans and insurance bonds sold to expats can be poor value for money due to the fees charged, and that buying investment funds direct was a better way of long-term saving. Mr Viney said the researchers polled about 100 expats, with the sample including a broad range of working expats and retired ones, based all over the world.
However, other advisers questioned the survey results due to the small sample. Alan Steel of Alan Steel Asset Management said: “In my experience, offshore bank accounts have lost popularity due to the low rates paid on deposits.”
And Tim Rainsford, an international financial planning manager at WT Fry, said: “I think the figure showing that one in five expats holds a regular savings plan is somewhat high, as they are mostly sold to working expats, particularly in the Middle East, while the one in 10 figure for insurance bonds is perhaps a little low.
“I think most expat clients keep a bit here and a bit there as far as cash is concerned, particularly if their host country has a weak currency, or problems in their banking systems, Greece being the latest example. Most are wise to hold onto their UK bank account. If you close a UK bank account and remain an expat, it is very difficult to open one again because of ‘know your customer’ rules.”
The research from AES International also showed that although many expats move overseas in the hope of becoming wealthier, more than half (52 per cent) end up saving no more than they did in the UK.
More than a third (34 per cent) said they spend more as an expat on socialising.
Sam Instone, chief executive of AES International, said: “Most people tend to move away from their home country for a combination of reasons, but high on the list is usually an increased salary.
“However, once people find themselves in what can feel like a holiday atmosphere, original aspirations to save can become clouded by the temptations of the here and now. People are also prone to procrastination and this is well demonstrated by their saving habits.”