Expat investor hopes dashed over higher fixed rate interest

Published:  7 Feb at 6 PM
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Last year’s promise of light at the end of the tunnel as regards fixed term deposit low interest rates seems to have been extinguished, leaving expat savers with a dilemma.

Late last year, the UK government’s announcement that bank borrowings under the Funding for Lending Scheme could no longer be used to finance residential mortgages lit a tiny flame of hope that expat interest rates might improve. The flame was fanned by the vague possibility that base rates might rise on falling unemployment statistics.

However, the Bank of England governor’s recent statement that he saw no need to increase the base rate and the lack of impact on savings rates of the government’s ruling dashed the hopes of legions of expat savers. Adding to the perfect storm is the rapidly decreasing number of offshore banks willing to take expat cash.

With inflation rising in most expat destinations and swathes of retirees stuck with frozen pensions, the situation begins to appear hopeless as more overseas investors become reluctant to tie up their nest eggs in long-term, poorly rated products. Many are searching for alternative investments, with unit trusts and OIECs popular in 2013.

An interesting alternative also increasing in popularity is investment in venture capital trusts, at present showing inflation-busting returns as high as nine per cent. Smaller companies are recommended, with VCT funds now at their peak, according to investment managers.

The unprecedented need for business funding outside the conventional high-street bank outleta is ramping up the success of VCTs, as companies needing to take advantage of economic improvement are, by definition, committed to growth. Best bets include the digital sector, smaller energy developers and companies developing innovative anti-ageing and disease treatments.
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