Offshore savings accounts explained Are my savings safe in an offshore account?
Money held in offshore financial institutions will not be covered by the UK’s Financial Services Compensation Scheme (explained in detail in Are my savings safe?). This means your cash will not have the same standard of protection it would get if you saved with a bank or building society based in the UK.
In the past, people who saved offshore took the risk that, if their bank or building society collapsed, their money could be permanently lost.
However, some popular offshore locations, such as the Isle of Man and Guernsey, now have their own financial compensation schemes – so, as in the UK, a proportion of your savings would be guaranteed should your account provider go bust.
It's worth remembering, however, that each country's depositor protection scheme is only as strong as the economy of that country. The UK FSCS is backed by the UK government, which is highly unlikely to ever go bust. Smaller economies could be more vulnerable, however. That's why Which? does not recommend that anyone puts their money into an account that does not have full UK FSCS protection.
Offshore savings protection
Some countries do not offer any savings protection at all, and the guarantees available to savers in different locations may differ significantly. Before you open any savings account, it’s vital to ensure you understand how your money would be protected, if any, in the event of a provider’s collapse.
In addition, you should investigate the standard of financial regulation in the country you’re considering: are there controls on who can set up a bank and how it is run? You may want to think twice about saving money in a location where there is little regulation in place.
It’s also worth checking whether there is a consumer complaints system in the country where your savings will be held. Should anything go wrong with your account, it’s important that you’re able to seek redress in a simple manner – and in a way that won’t cost you any extra money.