Savings Explained
Over
50s accounts
You may think it ‘ageist’ but some savings accounts are available to the over-50s
only. Providers that offer such deals tend to pay a higher rate of interest on these
accounts than on their standard savings deals. However, this does not mean
Over 50s accounts
pay the best rates. Even if you are eligible for such deals, it is still worth checking
to see what
savings rates
are available on other product types.
Affinity
accounts
Sports enthusiasts and charitable souls may be attracted to an
affinity account
that is linked to their favourite team or cause.
You do not usually get the best rate of interest with affinity accounts because
some of the income made from your cash goes towards the affiliated cause. You should
therefore see how the rates compare with standard savings accounts and decide whether
you would prefer to support your favourite team or charity in this way, or maximise
your returns.
Offshore
accounts
You do not usually get the best rate of interest with affinity accounts because
some of the income made from your cash goes towards the affiliated cause
Many high street banks and building societies offer
offshore accounts, as do private banks.
They are usually based in the Channel Islands and the Isle of Man because the tax
jurisdictions differ from the mainland.
Unlike standard savings accounts where interest is paid net of basic rate tax, interest
on offshore accounts is paid gross. You must still pay tax: any income from savings
must be declared on your self assessment form.
However, the deferral of tax in this way can be useful and boost your overall return
the money that would otherwise be automatically deducted stays in your account for
longer.
Most offshore accounts are available to anyone over the age of 18 (although some
are only open to those living outside the UK). However, the entry requirements are
quite high. The minimum deposit tends to be £5,000 or £10,000, so it is only wealthier
savers that can take advantage.
The rates on offshore accounts used to be higher than those on onshore savings vehicles,
but that isn’t necessarily the case any longer. They are therefore most popular
with people who live or work outside the UK – many allow you to invest euros or
dollars, as well as sterling, which makes them very useful if you derive some of
your income in a foreign currency.
You must still pay tax: any income from savings must be declared on your self assessment
form
It is also worth noting that offshore savings accounts are not covered by the
Financial Services Compensation Scheme
so you should check what protection you would have in the event of the bank going
bust.
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