For once, some offshore savers are getting a better deal than savers onshore
The third anniversary of base rate at 0.5pc falls next month and will surely be marked by the Bank of England yet again leaving it at this low level.
It’s been a long hard three years for savers, particularly those offshore, and there’s no immediate sign of things changing. But there are some reasons for expat savers to be cheerful including how, for once, some are getting a better deal than onshore savers.
Most UK expats will have at least some of their financial affairs, such as their pension, based in their mother country And that means that like it or not, the inflation rate in the UK remains important. Last week there was a sizeable fall in inflation: which is good news for savers.
Anna Bowes, director of savings website http://www.savingschampion.co.uk , said: “It’s encouraging news for savers that inflation has dropped quite dramatically from 4.2pc to 3.6pc, especially for those who rely on their savings. However, it’s still clear that savers have a long way to go to recoup the losses in real terms, since interest rates hit an all-time low and inflation has been rising in recent years.”
She (SNP: ^SHEY - news) added: “The news does give savers a little light at the end of the tunnel, giving some the chance to make a small 'real’ return on some accounts, although it’s tougher for those in offshore accounts because the rates don’t seem to offer as much as in the UK.”
With inflation at 3.6pc, expats will need to opt for a fixed rate lasting for longer than a year to get a real return. And this might be a good idea anyway, given that a fall in inflation probably makes it even less likely that the Bank of England will increase base rate in the near future.
Indeed, Sir Mervyn King, the governor of the Bank of England, hinted that base rate will stay at 0.5pc until 2014 although some experts say it could remain at this level until 2017. Sir Mervyn said that he had “deep sympathy with those who… suddenly find that the returns on their savings have reached, as I said, negligible levels”.
But he said that were interest rates increased to 4pc or 5pc, it may give the impression that savings returns had increased but the overall effects would not be positive. “I think that many savers would find that the value of their wealth would fall more than enough to offset the apparently higher yield and everyone would be worse off,” he said.
However, here’s some good news for offshore savers: in some cases they are getting better deals than or identical rates to those available to onshore savers.
Take for example AIB International ’s 12 month fixed rate of 3.5pc. On the UK mainland, its sister bank Allied Irish Bank GB is paying 3.4pc. It was paying 3.5pc but the rate was cut on Valentine’s Day. This could of course mean that a rate cut is imminent offshore, but two other providers Clydesdale International and Permanent Bank International (formerly known as Irish Nationwide IOM) are also paying 3.5pc.
Clydesdale International’s one-year rate is higher than its onshore sister, Clydesdale Bank, is paying for UK residents the rate is 3.2pc. And Permanent Bank’s one year rate of 3.5pc beats the 3.25pc its owner Permanent TSB (KOSDAQ: 045340.KQ - news) is paying on €10,000 or more for residents in its Irish homeland.
Over two years, Clydesdale International’s 3.8pc is higher than than the 3.6pc Clydesdale Bank pays onshore and Alliance & Leicester’s 3.7pc can be matched onshore by its parent, Santander (Madrid: SAN.MC - news) .
For five years, the picture is more mixed. Lloyds TSB International ’s 4.5pc can’t be beaten onshore by any others in the Lloyds Banking Group (LSE: LLOY.L - news) of companies, with the best deal from the Lloyds family 4.25pc fixed for five years from the Halifax. Clydesdale International’s rate of 4.3pc can’t be beaten by the 4.25pc offered by Clydesdale Bank in the UK. Alliance & Leicester 's UK parent Santander doesn’t currently have a five-year fixed rate to compare its deal with.
While it’s good news that in some cases offshore savers are beating those onshore, it’s worth remembering that this could mean deals may be withdrawn. Fixed rate deals can be taken off the market and repriced at any time. Although this doesn’t tend to happen quite so fast offshore as it does onshore, you should be aware of this risk if you find a rate that’s particularly attractive. Others are likely to feel the same way: which means it could disappear without notice. Charlotte Beugge used tables compiled by Moneyfacts.co.uk in the writing of this article Moneyfacts.co.uk the comparison site you can’t afford to ignore
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Expat rates: reasons to be cheerful