Is your cash protected in an offshore savings account

Published:  2 Sep at 6 PM
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Offshore bank accounts give convenient access to regular or emergency cash, but how many depositors know how much of their savings are protected?

Migration planning for would-be expats often includes opening an offshore bank account for access to pension payments transferred from onshore accounts. The option may become even more popular due to recent UK high street bank crackdowns on accounts held by UK citizens living permanently overseas.

However, given the ongoing instability in the financial world, just how safe is your money should your chosen bank go bust? The UK’s Financial Services Compensation Scheme ensures that £85,000 per person per bank account is covered – no help at all to expats who’ve lost half a million offshore.

Complications occur when a building society is owned by a bank. For example, a married couple depositing £250,000 in Lloyds Bank-owned Halifax Building Society and the bank itself are only covered up to £170,000.For expats using British-brand offshore banks, it’s even more of a problem, as compensation is based on the jurisdiction’s laws, not the UK’s.

Depositors using banks in the EU, Liechtenstein, Iceland and Norway are covered by the EU Deposit Guarantees Directive up to €100,000 per person. The Directive also covers Ireland, along with a top-up Eligible Guarantee Scheme covering most Irish banks, althought this only applies to accounts opened between 2010 and 2013 with selected financial institutions.

Guernsey, the Isle of Man and Jersey all have separate compensation schemes, all paying out just £50,000. Given the poor customer service reputation of companies in these jurisdictions, they’re best avoided by those looking to deposit serious money, especially as Gibraltar’s Deposit Guarantee Scheme protects the first €100,000 (£80,000) of any qualifying deposit.

Protecting your savings against a re-run of 2008 is best done by diversifying your deposit accounts, making sure none exceed each jurisdiction’s maximum compensation level. If you’re looking to deposit funds in your new country of residence, checking compensation limits is essential.
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