UK Investors Seek Alternative Savings Vehicles

by Phillip Morton, Investors Offshore.com

22 September 2005

Offshore investors are seeking alternatives to savings products which fall within the reach of the European Savings Tax Directive, according to a report in the Financial Times Advisor.

The FT report revealed that life assurance firms in particular are placing a stronger emphasis on vehicles such as offshore-bond wraps and deferred interest accounts which are not covered by the Savings Tax Directive.

Implemented on July 1, 2005, the Directive is an information sharing agreement between EU member states, their dependent territories and certain third countries whereby details of an individual's interest income is passed on to the tax authority of their home state by the country in which the account is held. While certain countries and territories with strong traditions of banking secrecy, such as Switzerland, Belgium, Austria, Luxembourg, the Channel Islands and the Isle of Man, have opted out of the information exchange clause, they must instead charge a withholding tax on this income for a transition period.

In response, firms such as Standard Life have been conducting research into the level of public interest for investment and savings vehicles that are exempt from the directive, and Iain McLeod, marketing manager of savings and investment for Standard Life, told the FT that plans to develop these products have been stimulated by recent interest.

“We do not offer investment offshore bonds at the moment, but it is something we are looking to do in the future. We have an office in Dublin looking into this and we have stated publicly that we intend to launch a similar product. Plans, however, are on-going," he stated.

However, Jonathan Spring-Rice, associate sales director, at London-based IFA Towry Law, sounded a note of caution by warning that HM Customs and Revenue could amend the rules retrospectively to catch these vehicles.

"The more life companies that start doing these policies, then the more the Revenue will look at them. This has happened before," he was quoted as observing.

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