Offshore banking is a massive perk to living and working abroad, getting your money paid into an offshore bank account free from UK tax is like receiving a bonus every month, but it’s what you do with that bonus that is going to be the main thing.

Working within the HSBC wealth management team, I always felt that I was doing the correct thing for my customer, especially during the turbulent times of the past few years, and of course I was, in my eyes, and the eyes of the UK banking sector. Being offshore has broadened my horizons and showed me that truthfully, ‘there is another way’.

I was always told as a young apprentice Financial Planning Manager, the best thing for a customer’s money was on deposit with the bank in some form or another, max out the ISA’s and go from there! It was safe and secure, but did the customers’ money really work for them? The interest rates in the UK for savers are pitiful and not much better for the offshore market either. Central Bank base rates are at all time lows and the GBP has had better and stronger days too.

If you had your money, let’s say £100,000, deposited into a 12 month Barclays Wealth offshore bank deposit account 4yrs ago, you may have been getting a rate of interest of 5%, giving you an annual return on your investment of £5000. Today for the same money, in the same account, you would be getting a return of £1420, that’s £118pm. If you’re retired, sooner or later with those kinds of figures, you are going to start eating into your capital Thailand then, suddenly seems more expensive. Ask any retiree who has been here a while, what going from 70-50THB to a Pound has meant to their standard of living, add that with the sudden drop in savings rates and the couple of bottles of Singha beer on a Sunday lunch time may now be just the one!

We all know, as its being widely reported over the past couple of years, that the big banks are currently not lending, they are like squirrels storing up for harder times to come, so they are hardly going to try and entice you in with high rates. To get a better rate you would need to go to a smaller bank, maybe in the Euro zone such as one of the Irish banks where you could get a maximum of 3.5%. When the credit crunch hit, the Irish government said that they would guarantee all deposits held within their banking system. Since then we have had the fall of Greece and a lot of the Euro Zone states wobbling, including the Irish, is that guarantee still reliable?

If you have your money in an onshore bank account and receive interest income and you are non-resident, then you must look to fill in the relevant R85 (getting your interest without tax taken off) form from the bank or building society or the Inland Revenue. However, if this and any other income that may be derived from the UK, such as rental income, takes you over and above the UK income tax threshold, then one or two things may need to happen. First, sell your UK property, if you haven’t lived as a non-resident for five full tax years, then you may be liable to UK capital gains tax. So the best thing to do is that you should really look to move your money offshore.

As I have already said getting a decent return on your savings at a bank is pretty much non-existent, so an alternative must be found. Such an alternative could be a Personal Portfolio Investment Bond, which will allow you to invest in a wide array of assets that will reflect your risk exposure. With Today’s economic climate as it is, emphasis should be placed upon capital protection.

You can place your cash in the bank on a fixed 12 month deposit (or longer to get a better rate), but if for some reason you want your cash out now, any interest you may have built up would then be lost due to early withdrawal. With an investment bond you can have up to 90% of your investment from day one, you can make regular withdrawals or one offs. Going back to the UK, you can take 5% of the capital per year for 20yrs or roll up the 5% year on year for 20yrs until you have taken the full capital amount, without paying income tax. More good news is that the interest will carry on being paid gross until a chargeable event happens, such as you withdraw more than the allotted 5% for that year. This means that if you decide to retire back abroad, the bond will become free of UK tax once again.

As previously stated, capital preservation is recommended at this time, especially if you’re saving for education fees or it’s your retirement nest egg. The 21st Century fund is a secure, high yielding regular income fund which is hedged into a currency of your choice, using a range of currencies. The fund is Mauritius regulated, mainly comprised of asset backed lending instruments that produce a targeted return of 7%. All of these instruments are very low-risk with assets cover that currently exceed 160% of liabilities. If you’re looking for consistent, above average returns even in volatile markets, If  your living and working in Thailand and therefore spending Thai Baht, this is the fund for you, as it helps protect you against currency risk, as it’s available not just in Sterling, but also USD, EUR and THB.

12 Month Deposit

In a recent interview with the Telegraph, Michelle Slade of Moneyfacts said:

‘Monthly interest is only available on a third of offshore accounts, leaving savers after a regular income from their money in a difficult position.
‘With rates so low savers are seeing their income depleted and many now have to eat into their capital which only exacerbates the problem’.

This is starting to be borne out in a lot of the banks who are removing the offshore arm of their business. Banks such as Northern Rock, Irish Permanent and Yorkshire Building Society, who took over Chelsea Building Society this year, are all making a run for the hills. Northern Rock Guernsey will close its doors on September 2nd this year and as an incentive, it will make a “goodwill” payment equivalent to 10 days’ interest – with a minimum payment of £20 – for those savers who move their money by the deadline.

Of course if you are already retired, then it’s the monthly income that you are looking for, an investment bond and 21st Century fund will provide you with this, unlike the majority of the offshore or onshore banking world at the moment. This will give you a regular income on your investment, hedged in to Thai Baht, giving you extra spending power whilst here in Thailand.

Even if you want to keep your money in a UK onshore account and need some help with the Inland Revenue forms, or if you want to shop around for the best offshore bank deposit rate bond, then come and speak with me, Antony Bell at MBMG-International, after all ‘there is another way’!