Market leading rates

In the wake of the savings rate war, first in the fixed rate market and subsequently with variable rate products, the offshore savings market has stolen the march in the last week, offering market leading offshore savings rates.

The top paying Offshore No Notice savings account currently offers 6.55%, which cannot be found on the equivalent onshore savings account. The Alliance & Leicester International eSaver Offshore Issue 1 is particularly attractive at 6.51% with a minimum deposit of only £1000.

The virtually - 'strings free' offshore savings account from Kaupthing Singer & Friedlander IOM is also particularly impressive. The Platinum Offshore Access account does require a minimum deposit of £25000 to qualify for the higher rate of 6.55% and minimum withdrawals are limited to £1000, but is otherwise restriction free - a good, simple, hard working offshore savings account.

Tax advantages

With the only remaining tax advantage to saving offshore being deferred interest accounts, and with previously little difference between the rates available onshore or offshore, the attractiveness of offshore savings accounts may have faded for some. But there is another issue, perhaps more real in today's unsettled savings market that savers should bear in mind.

Depositor protection

While it is very unlikely that you would need to call upon depositor protection schemes, as the Northern Rock crisis has highlighted it is not impossible for a bank to suffer financial difficulties. While many of the offshore providers are household names, many subsidiaries of our well-known banks and building societies, the protection on offer in some cases cannot be more different.

The depositor rules are based upon where your money is held:

• For Jersey or Guernsey and you will receive no cover at all
• The Isle of Man does have its own scheme, regulated by Banking Business (Compensation of Depositors) Regulation 1991, which covers 75% of the first £15000 per individual.

With offshore savings typically associated with larger balances, and in fact many providers insisting on a minimum balance of £10000 to £25000, should any problems ever occur it could present a real threat.

What to do next

There is no doubt that there are some great offshore savings deals to be found, but make sure you do your homework. Find out the tax implications, protection rights and make sure you get the right deal for your circumstances.