Expat savers are still failing to see any improvement in interest rates despite the general feel-good factor boosting confidence in the global economy.
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Although the Eurozone is still shrouded in gloom and economic indicators show output and trade and stalling, Britain is short of booming, but doing very nicely thank you under the circumstances.
However, offshore banks and building societies seem wary of interest rate changes and are not budging on what they pay to investors.
The Bank of England pegged the official bank rate at 0.5% again this month, but Governor Mark Carney has indicated rates will rise when the Bank feels the economy is ready for a change.
Offshore fixed savings rates have also failed to offer any great inducement to invest for months on end.
Break-even point for European savers
With basic rate tax at a typical 20% and inflation at 0.7% in Europe, expat savers on the Continent need a return of 2.18% to break-even.
Only two accounts offer above that rate – Skipton International’s 2.75% International Reserve Bond 3 asking for a £10,000 minimum deposit over five years and Permanent Bank’s 2.34% five-year bond demanding a £20,000 minimum deposit.
Everything else from mainline providers falls short of the mark.
The problem with putting cash into a five year deal is the likelihood of missing out on rising rates in the tie-in period.
The alternative is buying into deals that fail to reach the break-even point and cost savers lost capital once the partners in crime of tax and inflation whisk away the profits.
Sharia accounts beat the rest
Nationwide’s three year bond at 1.8% for £50,000 on deposit is decidedly unattractive, while Permanent’s three year offering of 2.11% for £20,000 on deposit is not exactly mouth-watering.
Lower down the pecking order, Permanent’s one year fix of 1.75% leads the pack – with Santander willing to pay 1.6% for £500 over 12 months, Lloyds 1.1% for £10,000 and Nationwide 1.45% on £50,000.
Nationwide has also introduced a six month fix at 1.35%, but again asks for a hefty £50,000 deposit.
One place to look for better rates are Sharia savings accounts for Muslims.
Bank BLME is paying 3% on a three-year fix and 3.5% on a five year fix for £50,000 on deposit.
An 18 month bond comes in at 2.25%, so all three accounts beat the inflation plus tax target break-even point for savers.
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