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Making your savings go further

Expatriates who have moved abroad to start a new job will often take this life-changing step because they want to save more, buy a larger home or they may want to make additional contributions to a personal pension. Research shows that better  housing and earlier retirement feature regularly as key motivations for becoming an expatriate in this respect.

But savings goals are often much harder to achieve than at first seems the case and, in particular, getting into the regular habit of saving and making sure your account is competitive can be a time-consuming experience. Many expatriates now find that even with good, tax-free salaries, high local living costs very quickly cancel out many advantages and saving is not as easy as it seemed when they were planning their new life abroad.

Choosing the right savings account is a key decision to get right in this respect and it is a vital step to take if you are to maximise your savings. But what features should a saver look for?

To start with, choose a name you know and can trust, such as Skipton Guernsey, who has been offering savings accounts to expatriates from its offices on Guernsey for over 12 years – as a result there is very little we do not know about expatriate savers’ needs.

This is important, as personal service and knowledge of your different savings’ needs can make such a difference when you are living and working overseas.  It is important also to look for a well-regulated financial environment so that your savings will be safe – the Isle of Man, Guernsey and Jersey are well respected financial centres, with a good choice of banking organisations offering a range of services from savings accounts to more complex trust and private client services.

 Other, smaller centres exist, particularly in the South Pacific, but savers are urged to be cautious, as supervision and financial protection levels are likely to be well below those offered by reliable brand names in the UK.

Part of the skill of actual account selection will come down to matching products to your personal circumstances. Are you likely to need cash quickly, or can you be relatively sure you can plan when you will want to withdraw funds? If you are able to bring that level of control to your savings portfolio, accounts which offer guaranteed one year rates or long notice periods such as 90 or 180 days are much more likely to offer a higher interest rate.

Look out also for accounts offering the best of both worlds, high interest rates with a limited number of penalty-free withdrawals each calendar year. In practice, although savers quite often feel they will need to withdraw funds at short notice, often the reality is different, so a limited penalty free withdrawal structure can give you the best of both worlds.

As a customer, you need to know how much interest you are earning and how this has changed following rises and falls in the UK base rate. As a result, you should look out for organisations which offer regular, personalised mailings every time interest rates are changed on their accounts as standard. This is important for another reason. Often banks will close old accounts and launch new products, which are in fact very similar to the account they previously offered. What differs is the interest rate, and it is not unusual for so-called ‘old accounts’ to lag behind their newer stablemates by a considerable interest rate margin. Choosing an organisation with a stable product portfolio and who keeps you informed when savings rates change solves this problem.

Working abroad, you may find that you are paid in a foreign currency or a major world currency, such as euros or US dollars. However, if your home is in the UK and you want your savings to be in sterling, you will quickly find that banks see foreign currency exchange as a significant profit centre. Sending small amounts of money back regularly is almost always not worthwhile, as the charges from making the currency conversion will eat into your savings. Savers need, therefore, to get into the discipline of making regular lump sum payments back home. But what is the most efficient way to do this, and should you use a banking organisation or foreign exchange company?

Foreign exchange (FX) costs are limited to a spread, that is, there is a buy and sell cost for the currency. Competition between organisations will be limited to the range of this spread, so you might get a better rate (more euros for your pounds) from one bank against another.

Transmission costs are different. If you are sending money within the UK, you can expect to pay around £20–£25 and the service is called CHAPS for same day cleared funds.

Sending money abroad, the service was called SWIFT, but nowadays most banks simply refer to it as electronic transfer of funds. Some banks will offer a premium priced service with funds guaranteed to arrive within two banking days; others will offer just a four day service.

Some organisations, like Skipton Guernsey, Abbey International or Yorkshire Guernsey, will change a flat fee of £20 –£30 to send money overseas, whilst other banks, such as Royal Bank of Scotland International, charge on a sliding basis according to the amount sent. The costs will generally be capped at around £40.

Customers also need to be aware of correspondent banking fees, and these will vary on a case-by-case basis.

 Correspondent banks are intermediary banks linking one organisation in one country with a bank in another. Correspondent fees will be levied in addition to any charge made by the sending banks and are often deducted from the amount sent automatically.

Look for a bank which offers low cost and simple foreign exchange. You may even find it is cheaper to ask your savings bank on Guernsey or Jersey to convert your savings, rather than have the conversion done where you are living overseas. UK banks are very competitive and their charges are often significantly lower than overseas organisations.

Specialists such as Skipton Guernsey offer such services and it all adds up to another way to make your savings grow more quickly.

So, all in all the mantra of the successful saver, therefore, is always to be vigilant.

Make sure you check your savings rates, look out for banks that go out of their way to communicate with you regularly and keep a close eye on regular costs. That way, your savings should grow much more quickly.

To find out more from Skipton Guernsey, enquire through the fast facts number below.

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• Skipton Guernsey
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