When you hear about offshore bank accounts, the first thing that comes to mind is a criminal enterprise. Movies have done an excellent job of associating offshore banking with sinister actions. But the actual applications of offshore accounts are more practical and closer to home than you would think. Although some offshore accounts have indeed been used for clandestine activities, this is the exception and not the norm.
Offshore accounts are common among expats and business people who have interests in countries other than the one they live in. You might also want to consider an offshore account as an effective saving and investment option abroad.
Needless to say, the requirements for an offshore account are higher than those of a regular account, and different banks offer different features and services with their offshore account.
Just as with your savings or checking account, when you decide to open an offshore account, you should investigate to find the best bank to open the account based on how easy the process is and the features that come with the account.
What is an Offshore Bank Account?
An offshore savings account is a savings account based outside the UK. Contrary to popular opinion, where offshore accounts are opened by globetrotting millionaires looking to evade taxes, offshore accounts are more commonly opened by expats and other people working abroad.
Many UK-based banks, including some leading fintech solutions, have an offshore arm. You can go through such options to open your offshore account.
Offshore accounts are different from other accounts and have different requirements. Typically, the bank will require you to have a minimum amount to invest in your offshore account. In most cases, the sum is £10,000 to open an offshore savings account.
Although offshore accounts have many benefits, they are not ideal for first-time savers. They require you to know how the account works to allow you to make the most out of it.
Why Should You Open an Offshore Account?
Several reasons can necessitate you to consider opening an offshore account. Opening an offshore account for the right reasons can have many benefits. For starters, managing your financial commitments across multiple countries and regions can be simpler.
An offshore bank account can also be useful when making or receiving regular international payments and transfers.
Most expats have a bank account in their home country and another account in the country they’re living in. Many also consider opening an offshore account as it can be an effective way to save, invest and manage money while they work abroad.
Some of the reasons you should consider opening an offshore account include;
- You’re working or living abroad
- You’re planning to move abroad for work or retire
- You’re an international assignee and move countries regularly for work
- You make frequent trips between countries for business
- You get paid in foreign currency, for instance, freelance workers
- You have family members abroad who you support financially, like paying school fees for your children.
- You own assets abroad, like property and investments
In each of the above instances, having an offshore bank account would make it much easier for you to manage finances while in another country.
Benefits of Offshore Banking
Even without an offshore bank account, managing your finances in other countries is still possible. However, having an offshore account presents unique benefits that make the process simpler and more efficient. Some of the common benefits of offshore banking are;
- Tax saving – Having an offshore savings account can potentially save you some taxes and investments in various currencies. However, any tax benefits enjoyed on the account would depend on your circumstances.
- Facilitate financial movement – Through the offshore account, you can hold money, and make and receive payments in multiple currencies. You can also use the account to manage foreign exchange.
- Access financial information – Most banks view an offshore account as a high-net-worth account and provide the account holder with international expertise and investment advice. You can also receive newsletters on potential investments from the foreign country.
- Convenience – With an offshore account, you don’t need to open a new account every time you move. You can keep the same bank account no matter where you move. Regardless of your location, you can rest assured knowing that your money is secure and central location and connected to your local accounts.
Your offshore bank account also has features like online and mobile banking and debit and credit cards. These add to the convenience of the account.
What Makes the Best Offshore Bank Accounts?
The features and costs of running your offshore account depend on your chosen bank. Before settling on any one offshore bank account provider, you need to know what makes a good offshore account so you can choose carefully.
Interest rates are a huge part of offshore banking. You need to get the best interest rates on your account, especially if this is going to be a high-volume account. While looking at the interest rates, you should strive to work with banks that are effective and transparent about their interest rates and are willing to notify you when such rates change. If the account can no longer offer you the best offshore account interest rates, you should be informed to help you make informed decisions about the future of your savings.
With offshore banking, it’s not like you can walk into the bank and ask to see the manager whenever you have a bank account problem. You could, but when you’re halfway around the world, you need a bank with robust customer support that can efficiently and effectively handle and solve problems with your account.
The bank needs to have a friendly and experienced customer support team that answers your calls professionally and not with automation services. The customer support team needs to understand how the system works and can handle most problems without having you wait in line for ages.
You’re no stranger to bank fees as long as you have a bank account. You might not know that some offshore accounts have fewer fees, so you should seriously consider diverting some of your wealth into offshore accounts.
A good offshore bank will fully disclose all fees that may apply to the account they offer. This makes it easy to compare the fee structure provided by one institution with another. You can then narrow down the choices and find the best bank that provides you with the lowest fees and highest interest rates.
Privacy and account data protection
Different countries have different banking laws protecting your information and account data. You should also take a closer look to understand how the bank you intend to open your offshore bank account with does to protect your proprietary information. This assessment should include what is shared and what is not shared with the government and other entities.
The ideal bank should provide you with any information you need for tax or other purposes while restricting access by any unauthorised entities.
Considering the above factors, it should be easier for you to choose from the tens of banks offering offshore banking in the UK, including some challenger banks.
How to Open an Offshore Bank Account
Opening an offshore account today is relatively easy thanks to online banking and challenger banks that make it more of a reality than a dream.
The process of opening the account will differ depending on the bank and the country. The procedures and regulations vary, but the general steps to follow are highlighted below;
Research which bank and country are right for you
Trying to find a bank to partner with when opening an offshore account can be an overwhelming experience, considering the vast range of options available to you, because a vast majority of financial institutions provide a way to bank offshore. Instead of looking at the various options, try weighing them against the following factors to help you narrow down the options;
- Banking regulations
Read the bank’s due diligence form
The due diligence form is not a standard in the offshore banking world. Some banks require it, and others don’t. The due diligence form often depends on the regulations and the bank’s jurisdiction. In some foreign banks, the high-value initial deposits can require a due diligence form.
At this point, you should check to make sure you’re eligible or have the means to open the offshore account.
Gather the required documents
You will need your passport, proof of address and proof of income as some of the requirements for opening the offshore account. If you plan to open an offshore bank account for your business, you may be required to provide additional documents like the share register, proof of ownership and certificate of incorporation. Try inquiring about the requirements for opening the account so you can gather everything for the next step.
Open the account
At this point, you’ve identified your bank of choice and the documents required to open the account. On preference, you can choose to open the account physically at the bank or online.
Fund the account
Not all offshore accounts will have the same requirements, and the funds required to open the account vary enormously from a few hundred pounds to hundreds of thousands.
Top 5 Best Banks for Offshore Accounts
Choosing a bank for your offshore account has a diverse take depending on your preferences. Many options are available in the market, and in some cases, you might even realise there are other accounts that might serve you better than an offshore account. Here are five options you should consider when opening an offshore account when shopping around.
Pay iO is a UK-based fintech that has been offering a vast range of financial solutions for individuals and businesses of all sizes. Pay iO doesn’t offer offshore bank accounts per se but has options that function the same way as an offshore account but with more convenience and accessibility.
Pay iO has a conglomerate of features capable of delivering the full offshore banking experience without opening an actual offshore bank account.
Pay iO is an excellent option if you’re looking for one account to take and operate wherever you are and easily access funds and spend in the local currency.
Among the features you can appreciate from Pay iO is the mobile and web accessibility that gives you direct access to your account as long as you have internet access. You can also apply to get a debit card that you can spend in thousands of ATMs worldwide.
You can also open a multi-currency account that allows you to hold funds in different accounts. The multi-currency account is a great tool for businesses and individuals who travel often and want to spend and pay in the local currency. The multi-currency account can be a great way to circumvent the costly currency exchange rate.
If you’re short on funds in a certain currency, you can use Pay iO’s foreign currency feature with competitive rates and low currency exchange fees to add the currency you want.
With additional business features like local and international payments and business debit cards, the only difference between Pay iO’s account and an offshore account is that the account isn’t set in another country. Still, you can take it with you everywhere you go. Just as if you were at home.
Barclays Bank is one of the best options for an international offshore account. You can open the account online, at the branch, by mail, telephone, or via a mobile app.
The minimum age for opening an account on Barclays Bank is 18 years, with no minimum opening amount.
Some customers must meet extra requirements to open an offshore account with Barclays Bank. Gibraltar residents, expatriates and Channel Island residents must qualify for an international or private bank account.
Interests in the account are compounded and paid quarterly. However, there is no early access. This account is great when looking for an offshore account on a budget that keeps the running costs low.
As far as the safety of your money is concerned, Barclays is among the top-rated traditional banks in the UK as far as safety and security is concerned.
Also, in the UK, the Financial Services Compensation Scheme protects your first £85,000 of savings per person, which also applies to savings in Barclays Bank. There are other options depending on where you’re located.
Lloyds Bank International
Lloyds Bank offers a premier international current account. It’s a lucrative account designed for high-income earners or high-net-worth individuals.
You can open the account online through your phone or on the web, in person at a Lloyds Bank branch or by mail. Management of the account is done through the same platform and is highly accessible. The bank hasn’t specified the minimum age for opening the account, but that’s most likely the same as the national standards.
Unlike Barclays Bank, which pays interest quarterly, Lloyds pays monthly, but the interest must be compounded, which is one of the downsides of the account.
The requirements for opening the account are locational. But as a basic minimum, applicants must meet residency criteria, which is discussed at the point of application. The minimum investment for the account on Lloyds is £100,000 or currency equivalent or a salary of £100,000.
If you’re hell-bent on having a Lloyds account but don’t have the £100,000 initial investment, they have an alternative account where the initial investment is £25k or a salary of £50K
HSBC has an Expat Premier Account that offers a central location that will serve as your bank account, allowing you to move to countries freely as an Expat.
The account offers a competitive tax rate with several countries with foreign exchange services and tax resources available in your home country and internationally.
The account requires you to be at least 18 years old to register and have a minimum balance of at least £50,000 or a salary of £100,000 to be eligible. You should also be living in a country that is eligible for these services.
The HSBC account might be useful if you have a family and you move often, needing access to the account in different countries. You can access the account when you need to 24/7 via the phone or mobile app.
Moneycorp has a personal offshore bank account that you can use to set up a recurring transfer internationally. This account is an excellent option if you have pensions or send money back home regularly. You can also use it to receive a salary or pay bills.
With the account, overseas payments are available in 120 currencies and 190 countries. Thirty-three of the currencies can be conducted online. It’s the kind of service, convenience and flexibility you get from challenger banks with the long and trusted history of Moneycorp in foreign currency transactions.
You will get a dedicated account manager with no transfer fees with the account, and the best part is that there is no minimum balance for this account.
An offshore bank account can come in handy in many scenarios. You just need to find one from the right bank with the right features that will help you maximise its functions. As you’ve seen, sometimes you can make a small adjustment by getting an account that allows you to access your funds in different countries, as with the case with Moneycorp and Pay iO, and these, too, would work great for some people. Take your offshore account personally because what works for another person might not work for you.