Antigua: Offshore finance centre for 2010?

As the global economy gradually continues to climb out of recession, foreign and offshore banks are proving an increasingly tempting option to prospective UK savers who are eager to get the most from their cash. Yet, an additional consequence of the economic crisis is the reformation of banking practices and management evident amongst a large number of respective countries worldwide.

Subsequently, 2010 is likely to be a year when financial centres change significantly, and others seem to emerge entirely. Antigua could certainly be seen as an example of the latter. Famed for its golden beaches, dramatic landscape and its tourism dependent economy, the West Indian island (referred as a country only when combined with Barbuda) has embarked upon an era of certified and committed financial transparency.

This change has been heralded by the decision of the Organisation for Economic Co-operation and Development (OECD) to move Antigua onto its white list, alongside other financial centres ranging from the United Kingdom and US, as well as other offshore centres including the Isle of Man and Jersey.

The OECD dates from post-war Europe, and was founded in France by Robert Marjolin in an attempt to aid the financial reconstruction of Europe. Today the OECD encompasses an international range of countries, with its own funding acquired from the combination of a portion of each respective member’s gross national product. The move for Antigua, therefore, represents the assurance from at least 12 members that it’s financial and tax – and co-operation standards – are in-line with rest of the world.

Caribbean islands including Barbados have been on the OECD white list for some time, whilst others, such as Anguilla and the Bahamas are waiting for further exchange agreements. It is now hoped that the Antigua’s new found position will see a much needed boost to the economy as the tourist industry has experienced less visitor numbers since 2008.

David Martin writes about foreign banking, from offshore savings to expat destinations.

Guide to Offshore Banking in 2010

2010 is set to be significant year for the respective banking industries of many countries around the world. In the UK customers look set to find the best savings deals, and banks are predicted to make moves to re-establish trust with savers more eager to switch to new accounts and new providers. So how is the offshore banking sector likely to change?

For savers in the UK, the Bank of England base rate looks likely to remain at the historically low 0.5 percent for a good few months yet, with some even predicting that it’ll stick around for the entire year. Consequently, more and more savers looking to get the most from their savings may be enticed by offshore interest rates which are proving to be higher.

Yet it is not just promising rates which looks to benefit the offshore sector, 2010 is also seeing something of a new era of transparency demanded of those with offshore accounts. HM Revenue & Customs have called for offshore savers to notify them of their offshore accounts if they have not already done so in order to cut down on the number of UK residents expected to be using offshore accounts to evade tax illegally.

Those who have not notified the HMRC by 4th January now face the risk of investigation and penalties up to 100 percent – whilst those who have notified have until the 12th March to pay back any tax owed.

However, this new era of transparency is causing many offshore financial centres to make significant changes also. In order to ensure that certain countries are honest with their tax practices, in 2008 the Organisation for Economic Co-operation and Development (OECD) drew up a blacklist of potentially harmful havens. The most recent to leave the blacklist is Antigua in the Caribbean which now joins both onshore centres such as the US and UK, as well as other offshore centres.

In order to move from the OECD blacklist to the white list, financial centres need to be signed off from twelve members in order to be assured its practices are up to the standards of the organisations. Antigua’s move will be a positive sign for neighbouring centres such as Anguilla and the Bahamas to follow suit – while fewer countries hold on to the notion that policies on tax are merely a matter of sovereign entitlement.

The changing face of offshore saving in Gibraltar

With the increasing popularity of the Isle of Man and the Channel Islands, the stereotype image of the offshore saver as wealthy retired expat has long been forgotten. That said, it is no secret that the sunny rock of Gibraltar just off the south coast of Spain is as popular with wealthy Brits as it ever has been – but its image is changing, and the island is more unique than one might expect.

Economic developments over the last year have caused much political focus on the on the operation of banks on the UK mainland and overseas. The G20 summit in April saw the decision made to enforce transparency and economic sustainability as a means to ensure that the world economy remains more stable in the future – and for the UK’s overseas territories (including Bermuda and Cayman) to comply, they had to sign 12 tax information exchange agreements (TIEAs).

Although certain territories have already met the target of 12, Gibraltar is well on its way and began signing their TIEAs on the 31st March 2009. Since then, it has signed agreements with another eight, including Ireland, New Zealand and the United Kingdom. Not bad for an island that many had thought unlikely to be able to shrug off its label as ‘tax haven’, for the more positive: Offshore Financial Centre.

However, entrepreneurs and those with a high income can still benefit from favourable taxes in Gibraltar, and its nearby location to the Costa del Sol is great for those who’d prefer to spend sterling than euros. Conditions of residency sets it apart from other territories though, if you are willing to pay more than £250,000 for property you need only spend one day on the island before you are considered one of its 30,000 residents. Though this is rumoured to change in 2010.

Additionally, despite its EU membership and ties to UK and Spain, Gibraltar’s own economy has proved considerably stronger with a reported 6.6 percent growth rate. With this in mind the island (and others) is set to be subject of an HM Treasury report into the challenges faced as it adheres to more stringent rules – and it will be interesting to see what the future holds.

Top Offshore Savings Rates - October 2009

Best rate at the time of writing for sterling balances in offshore banks comes from Halifax International, paying 3% for £2,500 or more deposited, with instant access.

If you have £10,000 to salt away for five years and make no withdrawals, Clydesdale Bank International offers 5.1% a year.

Anglo Irish Bank has the best rates for euros and dollars. 5,000 euros deposited pays 2.25%, with instant access; $5,000 on 90 days' notice pays 1.6%

The rates shown (c) are gross, i.e. with no tax deducted at source, and are ranked by the amount of notice of withdrawal (A) one has to give the bank without applying an interest penalty (or for the length of term, for fixed-rate accounts), and by the minimum ammount (B) left on deposit to qualify for that level of interest. Rates collated on 2 August are are subject to change. Rates on the no-notice and notice accounts are variable; those on fixed rate accoutns apply throughout the term shown.

Source: Moneyfacts

Bank	A	B	C
Sterling No Notice Accounts
Halifax International	None	£2,500	3.00%
Anglo Irish Bank Corp (Intl)	None	£5,000	2.80%
Alliance and Leicester (Intl)	None	£15,000	2.76%
Bradford and Bingley (Intl)	None	£1,000	2.50%
Sterling Notice Accounts
Alliance and Leicester (Intl)	50 Day	£25,000	3.00%
Alliance & Leicester (Intl)	60 Day	£25,000	2.97%
Anglo Irish Bank Corp (Intl)	30 Day	£5,000	2.75%
Bradford & Bingley (Intl)	60 Day	£5,000	2.75%
Sterling Fixed Rate Accounts
Clydesdale Bank International	5 Year	£10,000	5.10%
Clydesdale Bank International	3 Year	£10,000	4.25%
Halifax International	3 Year	£1,000	4.00%
Northern Rock (Guernsey)	01.08.12	£10,000	4.00%
Euro Accounts
Anglo Irish Bank Corp (Intl)	None	€5,000	2.25%
Irish Permanent (Intl)	30 Day	€10,000	2.25%
Anglo Irish Bank Corp (Intl)	90 Day	€5,000	2.00%
Skipton (Guernsey)	None	€25,000	1.75%
US Dollar Accounts
Anglo Irish Bank Corp (Intl)	90 Day	$5,000	1.60%
Investec Bank (Channel Islands)	90 Day	$50,000	1.60%
Anglo Irish Bank Corp (Intl)	None	$5,000	1.50%
Irish Permanent (Intl)	30 Day	$10,000	1.50%

Two new guaranteed bonds have benn issued by Britannia International. A six-year offer pays a fixed return of 5% for each year when FTSE 100 index of UK shares does not fall below 75% of its start value in October.

A three-year version pays 11% if the level of the FTSE index is equal or greater than the start value over the life of the bond. Intial captial, minimum £5,000, is guaranteed to be returned at the end of the term.

Economy Set to Grow While Offshore Interest Rates Look to Stay Low

As was predicted in a recent Reuters poll, after a meeting on the 6th August the European Central Bank (ECB) have announced they will be keeping interest rates on hold at 1 percent. Holding the rates for the foreseeable future is seen to be good news for the European economy in general, but is also great for those with a keen eye on offshore interest rates currently.

The ECB lowered its interest rate to 1 percent (its lowest rate in 11 years) in May this year, after moving it to 2.00 percent in January, 1.50 percent in March and 1.25 percent in April. By comparison, its highest rate of 4.25 percent came into effect way back in June, 2000.

In a press conference following the announcements, ECB president Jean Claude Trichet said: "Economic activity over the remainder of this year is likely to remain weak, although the pace of contraction is clearly slowing down. While uncertainty is still high... and we have to be prepared for ongoing volatility in incoming data, there are increasing signs the global recession is bottoming out. Looking ahead into next year, after a phase of stabilisation, a gradual recovery with positive growth rates is expected,"

The ECB's decision to hold interest rates at 1 percent will also be of interest to those with or considering offshore bank accounts. In a recent Reuters poll of economists and experts, all 75 of those asked predicted that rates would be kept at one percent, with many estimating that they will not be set to rise again until the fourth quarter of 2010.

Of course, if the predictions of those in the Reuters poll turn out to be correct, offshore accounts will begin to look very tempting again especially if UK banks begin to push up rates despite the Bank of England's seemingly comfortable 0.5 percent. However, expats may also be more inclined to consider an offshore account after Sterling's fall when the Bank of England announced quantitative easing on the 6th August, as the Euro stood firm when the ECB said it was holding its rates.

Guernsey - Offshore Banking Centre 2009

Despite their reputation ten, maybe twenty years ago, stringent rules and the emergence of the Organisation for Economic Co-operation and Development means offshore banks are now considered an accessible and viable option for savers whether they are expats or not. For those looking for the best savings accounts in Europe, offshore finance has long been connected to areas such as the Isle of Man and Switzerland - but more recently, Guernsey has also established itself as a contender.

While the financial sector may not yet contribute to the Guernsey economy as much as it does in Switzerland and on the Isle of Man, banks have been beneficial to the development of the Channel Islands since the 60s. Today there are around 55 banks on the island, due as much to its desirable and convenient location, as its low taxes - a statistic that is all the more impressive when one considers its size of 25 square miles. That's an average of more than two banks per mile.

Expat Offshore Savings - Funds for Retirement

As an expat (expatriate) you are in a privileged savings and investing position. Make the most of the options available to you while you can, consider investing offshore for your retirement. While you reside overseas you are legally entitled to make use of any tax savings in the country in which you reside, furthermore you are most likely in a position to save and invest offshore to fund and fuel your retirement.

Not enough expatriates make use of their offshore advantage when living and working abroad. Don’t make the same mistake! Do you already have a domestic pension plan in place from your home country that you established prior to working abroad? Have you found that this policy is not as mobile as you are? Does it make sense to continue with the savings policy?
Have you been considering switching from retirement savings plan to savings plan as you change from country to country? Did you know that by doing this the income you end up with in later life will be fragmented and may be whittled away by foreign exchange costs, charges or even a cash-strapped government?