Guide to Saving on Guernsey

Guernsey Savings Options for Expats  

There is no doubt that options for expat savers are decreasing across the board and tight global economic conditions have seen many financial institutions re-trenching both onshore and offshore.

This has seen the announced closure of Anglo Irish International on the Isle of Man and in June this year, Northern Rock announced it was closing its doors in Guernsey (Do you have money with Northern Rock Guernsey and need to know what to do?). Yorkshire Guernsey is also believed to be currently considering its options on retaining a presence in Guernsey. So what can savers expect from Guernsey? ExpatMoneyChannel’s Hannah Beecham paid a visit to find out exactly what is on offer and how economic conditions are shaping the financial landscape for expats. She spoke to James Blower, Managing Director of Clydesdale Bank International (top right) and Alan Bougourd, Managing Direct of Skipton International (below).

What are expats buying?

JB. With interest rates still bobbing about at the low end of the rate scale, expats are beginning to go for the carrot of higher rates in return for tying up their cash for a longer period. We’ve seen an increase in people who are prepared to tie their money up for one and two years in particular. But also people are putting their money away for three and five years which is quite unusual. Offshore bonds is another area expats find appealing due to their tax deferment qualities.

AB Clients were looking for better value so we’ve introduced a 90 day notice account and we’ve withdrawn a 60 day notice account. We’ve also had a good reponse to our decision to increase the number of longer term bonds we have on offer.

How have economic conditions affected savers?

JB. They prefer a financial strong institution that offers a good solid service rather than bells and whistles. People have become more interested in what is happening in the economy in general. Certainly the number of conversations I’ve had with about credit ratings, parental guarantees and the financial state of the company have been much more than at any time in my career previously. I could count on one hand the number of questions about credit ratings I’d had in the year prior to this one.

AB Customers are looking more at the quality of the institution they are saving with.

What products are currently popular?

JB. Currencies continue to be popular with financially sophisticated expats are using strong performing currencies to complement their savings strategy. In particular, we offer a range of six. Also internet banking, debit cards and a range of savings accounts from current account through to five year term deposits. We don’t charge for debit card withdrawals, which is appealing to expats.

AB The escalator bond we had on offer was very popular. It is over five years but gives clients the option to withdraw at the end of each year. So very flexible. Currency accounts are also popular as they offer flexibility to expats who have liabilities in different currencies, such as a sterling pension and a euro mortgage.

Any launch of a new product or services on the slate?

JB Step deposits whereby expats can tie up their money for a longer period but which also has the ability to break earlier into the deposit penalty free zone. So for example maybe a five year term but you can break after years one, two, three and four without penalty.

AB. The ability to transact online is something we are exploring. We are also looking to extend our telephone banking facilities to give added flexibility.

What about compensation?

The Guernsey Banking Deposit Compensation Scheme came into force on 26 November 2008. It covers all retail deposits in banks licensed by Guernsey up to £50,000 per depositor. Like similar schemes in other centres, it will only cover the parent so, for example, if you have deposits with NatWest International, Guernsey and Royal Bank of Scotland International, Guernsey then any entitlement to compensation will be pooled across both accounts. However, unlike similar schemes the maximum total amount of compensation is capped at £100 million in any 5 year period. So, if more than one bank fails within a 5 year period, and the £100m cap is breached then compensation will be reduced.  

How will the EU Savings Directive affect savers?

Guernsey is currently in the process of deciding how it will comply with the directive. Guernsey, like Jersey and the Isle of Man, is not obliged to comply with the EU Savings Directive which as from 1st July 2011 requires all deposits by EU residents to be reported to the tax authority. While the Isle of Man has decided to go down the road of full disclosure. Jersey has opted to offer savers the option to either disclose their savings or pay a retention tax, which is currently 20%, but will rise to 35% in July 2011. The EU Savings directive will not apply to deposits made by residents outside of EU member states.