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Expat Investor : December 2007
OFFSHORE SAVINGS expatinvestor.com 8 EXPAT INVESTOR December 2007 Continued from page 7 same as those offering the best rates at the end. It wasn't all plain saving in 2007, however. When Britain's fifth largest mortgage lender, Northern Rock, put itself up for sale, sterling borrowers fretted over how the credit crunch would affect the other half of their lenders' businesses -- namely their savings. As a result of the crisis in confidence the UK's Financial Services Authority (FSA) has increased the limit on Financial Service Compensation Scheme (FSCS) cover for deposits to 100% of the first £35,000 of each depositor's claim. The previous compensation limit was £31,700 -- 100% of the first £2,000 and 90% of the next £33,000. Clive Briault, FSA Managing Director of Retail Markets, says, "At a time of market uncertainty, it is important expats are failing to save their wages. ALIL points out that with a third (32%) of expatriates moving overseas to land their dream job, the expatriate community is becoming more diverse than ever. Almost half (40%) are relocating to destinations such as the Middle East, Australia and the US to further their careers. More recently, expatriate communities as far away as Africa, Singapore, Thailand and Russia have been growing. Even though workers are relocating to more diverse locations, their lifestyle choices and financial habits remain similar. The research revealed that today's expat has lived abroad for between one and five years (46%) yet over two- thirds (70%) do not set up an offshore savings account for consumers to know their deposits are properly protected. The action we have taken is designed to help reassure depositors with accounts up to £35,000 that they are 100% covered. The Government has indicated that it will propose further changes relating to financial services compensation arrangements in the UK designed to give consumers confidence that their savings and deposits are safe and secure." The UK's Chancellor of the Exchequer, Alistair Darling, has announced that his department is looking at a US-style system of protection which covers savers' deposits in a collapsed bank by moving the assets into a reserved account and reimbursing savers the full sum within days of any such crisis. A consultation and study process would examine the following regulatory points. First, what would be the effects of a further increase in the amounts guaranteed? The overall compensatory sum guaranteed for savers, using a US- style system of ring-fencing savers' deposits in the event of a bank's crash, could be as much as £100,000. The Chancellor also wants to introduce changes that would offer depositors greater transparency and prevent financial institutions from obscuring high risk investment on their balance sheets. In addition, any improved regulations would ensure savers understood the risks involved. Simon Hull, Managing Director of Alliance & Leicester International (ALIL), has recently warned that, according to research, immediately they relocate. And despite relocating in a bid to further their careers and earn better wages, expats are failing to save their hard-earned cash in the best way. Mr Hull comments, "Although in today's diverse society there is no such thing as a 'typical' expat, people consistently fail to open an offshore savings account when moving abroad. "With reliable internet access now widely available in most countries, expat workers can safely and easily find the best ways to save their wages. "Almost three-quarters (70%) of expatriates use the internet on a daily basis, as being distanced from the UK they are reliant on it to keep in touch with family and friends, monitor the news, and manage their finances. "With 40% of expats surfing for up to an hour a day they can easily email friends, catch up with current events, and save their wages in one stress-free sitting, regardless of where they are in the world." Tu rn to page 12 to compare the best rates currently on offer in the offshore market place. Alliance & Leicester International 10150 Bradford & Bingley International 10151 Irish Nationwide (IOM) 10152 Kaupthing Singer & Friedlander (IOM) 10153 Scarborough Channel Islands 10154 For more information just enter the above numbers on the Reader Reply Ser vice coupon on page 20 or visit www.expatinvestor.com FAST FACTS "The Chancellor also wants to introduce changes that would offer depositors greater transparency and prevent financial institutions from obscuring high risk investment on their balance sheets. " "Almost half (40%) are relocating to destinations such as the Middle East, Australia and the US to further their careers. More recently, expatriate communities as far away as Africa, Singapore, Thailand and Russia have been growing." Money Tool from Derbyshire Offshore Savvy expatriate savers have benefited from the five UK interest rate rises since summer 2006 by squirreling their money away in accounts which track the Bank of England base rate. These special types of accounts mirror any movements in the base rate, so if it goes up, so does your savings rate -- although bear in mind that rates can also decrease as well. Trackers usually pay interest which is a small percentage above the bank base rate -- which currently stands at 5.75% -- and often come with special rate deals for the first year of saving. Savings products which track the base rate always seem popular with a certain type of saver -- those who want reassurance that their interest rate is linked to the Bank of England and those who want to save for the long term without chopping and changing their accounts. When the base rate starts to move upwards, these kind of accounts become more popular still, as there are many savers who want to capitalise on rising interest rates. Many of those savers who put their cash into a tracker account before the Bank of England started upping its interest rate from 4.75% in August 2006 could have seen their own savings rate leap by at least 1.25% in the past 15 months. And while most City analysts now expect interest rates to begin to fall, the common belief is that they won't come down until early next year, meaning savers should act now to grab the best tracker rates while they can. Derbyshire Offshore, the offshore banking subsidiary of Derbyshire Building Society, currently offers two accounts which track the Bank of England Base Rate. Its Limited Edition Base Rate Tracker offers savers a competitive variable rate of 6.52% gross/AER on balances of £5000 to £2m. Easy access to funds is assured with four notice free withdrawals allowed each year for any amount, and further withdrawals with a 30- day interest charge. The interest rate also comes with a double guarantee -- to be at least 0.15% above Bank of England base rate until 1st May 2008 and then no more than 0.25% below the bank rate until 1st May 2009. Meanwhile, its popular Income 60 Tracker account pays interest of 6.54% AER (6.35% gross) on balances between £10,000 and £2m and provides monthly interest payments at a rate guaranteed to be within plus or minus 0.25% of the Bank of England's base rate until the end of 2008.
January February 2008