Basic offshore banking for expats

United Bank asks why expats should make offshore banking arrangements a priority

Some expats seem to wonder if they even need to set up an offshore bank account, thinking they can get away with using an account based in their home country combined with a local account in the country they’re going to live in. A survey carried out by Abbey National Offshore last year found that 81 per cent of people fail to consider banking needs before they move abroad; 60 per cent say this is because of a lack of understanding of how offshore bank accounts actually work.

There’s no denying that it is possible to live with a combination of a bank account back home in the UK and one based in your foreign country of residence. The problem with doing things this way, however, is that, for a start, you usually won’t be able to access your account details around the world if it is a national package. If you think you can simply walk into an office of your UK high street bank in Dubai and transact on your British account, you might find yourself cruelly disabused.

Next, and this is perhaps one of the biggest advantages an offshore account has to offer, are all the tax advantages that will accrue to you automatically through gross payment of interest. And for that matter, remember that every penny saved in taxes means more growth to your account. There is no point in having an onshore account paying 5 per cent gross interests if the local tax authorities erode from it 3 per cent in taxes.

Do I need immediate liquidity on my account? Although this might seem to be a futile question at first sight, it is a fundamental one for the (tax-free) performance of your account. In general, the longer you are prepared to leave your money the more interest an account will pay. For example, your savings would earn more interest in a 90-day, or even a 365-day notice account, than they would in a regular instant access product, so it makes sense to consider this aspect and keep in touch with the type of accounts available in the market.

Decide how much access you need to your savings and, if possible, opt for an account with a longer notice period. Depending on the account type, you can still get partial penalty-free withdrawals should need arise.

Such types of offshore bank accounts, for example the Multicurrency high return deposit account by United Bank Ltd in St. Vincent and the Grenadines, offer expats all the related tax advantages, specialised services such as multi-currency options, world-wide accessibility 24 hours a day and, in addition, an instant penalty-free withdrawal of up to 10 per cent of your account’s balance If your needs are more sophisticated, why not consider splitting your deposit into various account types? If you have a lump sum to invest, you could open more than one account with different notice periods and in different currencies thus optimising the return and the liquidity of your investment. A very good choice would be considering to use a base rate tracking account to ensure you automatically benefit from central bank’s base rate increases.

These accounts mirror any increases or decreases in the base rate of central banks. This means you don’t need to closely follow what is happening on an account because the interest rate exactly tracks the respective currency’s base rate. Do remember, however, to watch what happens at tracking review dates for these accounts.

You can also make the most of bank websites to keep an eye on the rates available and new products. Consider registering with banks to receive rate and product updates by e-mail; this is particularly useful for products of limited availability such as fixed-rate bonds, which can come and go before the post reaches overseas destinations.

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