Brexit and UK bank account
difficulties
The U.K. bank accounts of
thousands of British nationals living in the European Union will be closed by
the end of the year as the country nears its exit as a member nation.
If pan-European banking
rules no longer apply to the U.K. once the Brexit transition period ends on
December 31, it would become illegal for U.K. banks to provide services for
British customers in the EU without applying for new banking licences. So far,
no new arrangement has been agreed.
Lloyds Bank confirmed to The Sunday Times that it will be withdrawing services from Holland, Slovakia, Germany, Ireland, Italy and Portugal - in a move that will affect 13,000 British customers. The letters note the bank is no longer allowed to offer them services and they should seek alternative arrangements.
At the time of writing
there has been no communication that will effect Cyprus residents. However
there is a FAQ page on the Lloyds website which includes the question:- Why
can’t a non-UK resident apply for a new savings account with you?
To which the answer given
is ‘Whilst we value the relationships we have built, we have made a strategic
decision to focus our attention and resources mainly in the UK and to reduce
the number of countries in which we operate. Among the considerations for that strategic
decision are the varied legal and regulatory requirements that apply in each
overseas jurisdiction.’
“We have written to a
small number of customers living in affected EU countries to let them know that
due to the U.K.’s exit from the EU, regrettably we will no longer be able to
provide them with some U.K.-based banking services,” Lloyds said in a
statement.
Coutts is another UK bank
which has begun notifying clients resident in the EU that they will no longer
be able to serve them from January as UK institutions step up their no-deal
planning. HSBC and Santander say they have no plans to close British expat
accounts in the EU.
Without a continuation of
crucial pan-European banking rules, known as passporting it becomes illegal for
U.K. banks to serve British customers living in the EU without applying for new
banking licences. UK fund and investment management groups have primarily
responded to the challenge by opening EU-compliant distribution hubs in
Luxembourg and Dublin.
Cyprus residents may recall
that around 4 years ago that those with bank accounts at Barclays were written
to with a letter than stated their accounts would be closed if they held less
than a specified level in their account, a figure in the hundreds of thousands
of pounds.
Many UK expatriates retain
pension and dividend payments or rental income in GBP and wish to continue the
use of their UK based bank account whilst living abroad. Some pension trustees
even insist that pension payments are paid into a UK based account.
So for those residents who
have been notified or expect to be notified of their account closure what
alternatives are available?
The use of international
bank account, what often used to be termed ‘offshore’ may be appropriate for
some clients. Here we try and provide some useful guidance for those in need.
What
is an international account?
An international savings
account is, simply put, a savings account that is based outside of the UK.
While it might call to mind images of oligarchs and shady characters who
deposit money with overseas institutions in order to avoid tax, that's not
often the case. In fact, they're more likely to be opened by expats and other
people working abroad.
Many of UK-based banks and
building societies have a non UK mainland arm, You are typically required to
invest a minimum sum of £1,000 to £75,000 open an account, so these accounts
are unlikely to be suitable for first-time savers.
What
charges will I pay with an international account?
One downside to offshore
savings accounts are the myriad fees and charges that you can face for the
day-to-day running of the account. The most common charges you'll need to look
out for include: Withdrawal fees, Transfer fees, Monthly accounts fees, Charges
for not maintaining a minimum account balance, CHAPS fee (these can vary
depending on which currency is used), International payments, Cheque clearance
charges, Document translation charges, Agents payments on foreign transactions.
Prices will vary between providers; some advertise free withdrawal fees as a
major perk, while others will charge a percentage of the amount being
withdrawn. You should check a provider's terms and conditions before opening a
savings account to see if the charges suit how you want to use it.
How
do I open an international account?
1. Find a bank: make sure
it offers the kind of account that you want, and then apply either online or over
the telephone - depending on what the bank offers.
2. Send your verification
documents: much like opening a UK account, the bank will need to check your
identity. You'll usually need things like a certified copy of your passport or
driving licence, plus recent bills or bank statements. We can normally assist
you with those aspects.
3. Get approved: the bank
will usually contact you to say your account is open and ready to go.
4. Make your initial
deposit: this will usually be done online, but you may also be able to send a
cheque. As with UK accounts, minimum initial deposits vary, so you may have to
pay anything from £1-£10,000 in order to activate your account.
5. Start using your
account:
How
are international accounts managed?
Managing an international
account is usually done online, and most providers have telephone service lines
Where
are most offshore accounts held?
The most common countries
that hold international accounts for UK citizens are: Jerse,y Guernsey, Isle of
Man and Gibraltar.
Are my
savings protected?
Before you open any
savings account, it’s vital to ensure you understand how your money would be
protected, if at all, in the event of a provider’s collapse. Most of us
will remember back to the 2013 Cyprus banking crisis.
Money held in UK offshore
financial institutions is NOT covered by the UK’s Financial Services
Compensation Scheme so 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. The
location of the financial institution you choose may not be immediately obvious
from its website – but it will affect whether your money is protected if it
went bust. Several popular jurisdictions have their own financial
compensation schemes so, as in the UK, a proportion of your savings is
guaranteed should your account provider go bust.
Here are some examples
from some of the most popular countries for international accounts:
Jersey Depositor
Compensation Scheme (JDCS) covers up to £50,000 per person, per Jersey Banking
Group.
Isle of Man: Depositors'
Compensation Scheme (DCS) covers up to £50,000 of net deposits per individual
depositor.
Guernsey: Guernsey Bank
Deposit Protection Scheme (GBDCS) covers up to £50,000 per individual
claimant per institution.
Gibraltar: Gibraltar
Deposit Guarantee Scheme (GDGS) covers up to €100,000 of qualifying deposits.
It's worth remembering,
however, that each country's depositor protection scheme is only as strong as
the economy of that country. In the UK, the FSCS is backed by
the UK government, which is highly unlikely to ever go bust. Smaller economies
could be more vulnerable, however.
You should also 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?
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.
This article makes no
recommendations for Cyprus residents to move to a specific account or banking
institution, just offering some potential options.
Some options at the time
of writing.
HSBC EXPAT
PREMIER ACCOUNT
The HSBC Expat
Premier Account is an award-winning bank account available in sterling, dollars
or euros. Included with the account is a debit card, a Foreign Exchange app as
well as a complimentary travel security service. The account is access via 24/7
phone access, mobile banking app, online or a dedicated Relationship Manager. Minimum
Balance £50,000 deposit
Natwest International,
International Select Account
A fee-free international current
account to help make your money work in the UK and internationally.
LLOYDS
PREMIER INTERNATIONAL ACCOUNT
Lloyd's Premier
International Account is designed for high earning expats who need to manage
multiple currencies while living outside of the UK. The accounts are held in
offshore accounts in either Gibraltar or the Isle of Man. With the account
there is also a dedicated relationship manager and worldwide travel insurance
included. Account holders can also choose the currency of the account from
either Sterling, Euro or US Dollars with a Visa debit card in the chosen
currency. Minimum Requirements £100,000+ salary per year (or
£100,000 to deposit into a Lloyds saving account)
STANDARD
BANK OPTIMUM ACCOUNT
Opening an international
bank account with Standard Bank is easy and within the reach of anyone wanting
to expand their horizons. With a low entry point, the Standard Bank Optimum
Account is your door to a world of international banking. Expats need look no
further if they want the assurance provided by an established bank able to
offer holistic banking solutions. Minimum balance £4,000.
Santander International
Gold Bank Account
The Gold Bank Account is an everyday
international bank account, available in Sterling, Euro or US Dollar
currencies. It is accompanied by a Visa debit card available in all three
currencies for easy worldwide access to your money. Minimum Balance £25,000
across Santander International products
There
are one or two institutions that we have discounted. One bank has a scheme
where it holds deposits and investments in one suite. The problem here is that,
along with a high minimum balance, your IFA can see all banking transactions,
whether its your EAC bill, your night out on Bar Street, or your variable taste
in online purchases.
Please also
note that those who are Cyprus resident but who are Crown Employees, e.g.
British Armed Forces and UK Public Officials posted abroad, are defined as
living in the UK.
Written by Lee Hinton, an Associate Member of the Chartered
Institute of Securities and Investments, holds the Cyprus Ministry of Finance
Advanced Examination certificate and holds the UK Diploma in Financial
Planning. Contact Lee at Aisa Group on 26951600
