Offshore Vs. UK Savings Accounts

We compare offshore savings accounts with those available to residents of England, Wales, Scotland and Northern Ireland.

Offshore savings are not exclusive like they used to be, although the best offshore rates still require heftier minimum deposits.

I'll take a look at fixed, one year deals. Shorter deals just aren't worth the increased risk and I'm not happy with longer ones either. Firstly, the rates are not much higher. Secondly, I wouldn't lock your money in for more than one year, because there's a serious risk that interest rates will rise rapidly in that time if the economy begins to recover. If you lock in at today's low rates for a long time, you'll miss out if rates start rising.

I've scoured various data providers and the banks' own websites to try to find the best accounts on offer:

The top five 1-year fixed offshore savings accounts

*You can still get 3.65% with this Griffon Bank if you invest greater than £10,000.

I've expressed interest as 'AER'. For those of you who don't know, AER is the Annual Equivalent Rate. It's a way of expressing the interest you'll receive that makes it consistent amongst all providers and accounts, so that it's easier to compare. If you invest £100 and the AER is 5%, you'll have an extra £5 at the end of the year.

In all my tables I've excluded accounts with onerous or expensive catches, e.g. those that expect you to invest an equal amount in a dubious investment product or that expect you to have a current account with the same bank.

With all the accounts mentioned in this article, there will be penalties for leaving early and some won't allow you to do so at all.

About the offshore centres

Just two offshore centres made the list: Isle of Man and the Commonwealth of Dominica. Don't confuse the Commonwealth of Dominica with the Dominican Republic. This is an English-speaking democracy that got its independence from the UK in 1978. As far as I can see, it has no savings protection scheme.

The Isle of Man protects up to £50,000 in its entirety, like the UK's Financial Services Compensation Scheme. Its Government will fund up to £150m and the rest of the funds are raised from the island's banks after one of them goes bust. However, there's a lid on how much it can raise from the banks each year, so in the event of a big or multiple collapses it could take many years for you to get your money back. It's not worth getting hysterical about it, but there's a possibility it's another Iceland waiting to happen. It's up to you to decide whether the risk is worth it.

Top UK savings accounts

To compare these offshore accounts I'll consider similar deals protected by the Financial Services Compensation Scheme, that is to say, one-year fixed deals on UK-based accounts. I have again (and as usual) searched hard, and I've found these to be top:

Fixed rate savings accounts based in Britain and Northern Ireland

All of these are 12-month fixes except for Birmingham Midshires, which is 11 months.

All of these accounts are fully covered by the FSCS compensation scheme, with the exception of the Bank of Cyprus.

The first £20,000 (or thereabouts) of your investment in the Bank of Cyprus is covered instead by Cyprus' compensation scheme. The rest, up to £50,000, is covered by the FSCS. Even so, you may consider this to be higher risk.

There are risks wherever you save

My opinion is that it's not worth the increased risk to go for an offshore-fixed deal, as the return is just slightly above accounts based in Britain and Northern Ireland. However, although some places are safer than others, nowhere is totally safe.

All the accounts in this article allow deposits in the millions, but even if you have nothing like that amount, you'll hopefully do your best to spread it out. Many of these banks, offshore or otherwise, are most likely desperate for cash, so spread your bets by using more than one savings account if you're investing £50,000+. I also recommend splitting your savings if you have less than £50k, just in case. If you choose to invest offshore, I'd split it between different offshore locations as well as different banks.

This article has been about fixed-rate savings accounts. Don't forget to consider easy-access savings accounts. Also look at cash ISAs, which have low maximum investment limits but charge no tax. Otherwise, they're the same as any other savings account.

> Compare savings accounts with lovemoney.com