Expat savers have faced a two-pronged attack in recent years – a tightening of tax rules and low interest rates.
Combined, a tougher regulatory landscape for offshore banks and a lack of return on money invested for savers have led many organisations to reconsider their place in the market.
This has led to a procession of closures as high-profile banks and building societies have retreated onshore.
The latest is Bank of Ireland (Isle of Man).
Bank winds down
A spokesman explained the bank was only for taking deposits from offshore savers and the bank ‘no longer sees this as a core focus’.
Part of the thinking behind this decision will be the American Foreign Account Compliance Act (FATCA) and the UK equivalent laws between tax authorities on and offshore. These agreements call for financial institutions to implement expensive and time-consuming regulatory changes reporting the details of customer accounts.
“The bank has closed to new business and is winding down operations,” said the spokesman.
Saying goodbye to the Bank of Ireland (Isle of Man) is a problem for expats as the bank offered some of the most competitive offshore interest rates for customers.
The Republic of Ireland now has a single offshore institution – Permanent International, which is a subsidiary of Permanent TSB, the 99% state-owned bank.
The savings climate is unlikely to improve over the next two or three years, as Bank of England governor Mark Carney has explained interest rates will stay low until the economy has created 700,00 new jobs.
At the current rate, that could mean three years or more of stagnant interest rates for expats.
Offshore savings rates
According to financial comparison site Moneyfacts, the best 36-month fixed rate deal is just 2.15% from Permanent Bank on a minimum £20,000 deposit.
The Co-Op noses ahead by 0.01% offering 2.09% on a 24-month fix with a minimum balance of £5,000. In second place is the Permanent with 2.08% on a balance of £20,000.
The Co-Op also scrapes a 0.02% lead over Britannia International with a 1.87% fixed 12-month bond with a minimum account balance of £5,000.
Skipton International will pay 1.6% on a 100-day notice account with a £10,000 deposit.
All the rates are gross, so income tax needs deducting at the marginal rate of the country wherever the expat saver lives.