Savings accounts - frequently asked questions

Category: Savings
Date: 8/31/2008

Do I have to pay tax on offshore accounts?

Interest earned on offshore accounts must be declared on your tax return. The European Union Savings Directive was introduced on 1 July 2005 and under this directive, financial institutions in EU countries are required to exchange information on interest paid to customers who are resident in other EU countries. Customers can opt to pay a withholding tax and no details will be passed onto HM Revenue & Customs.

I am a UK national living abroad. Can I open an account in the UK?

To qualify to open the majority of accounts, the investor must be a resident in the UK. If you live abroad and already hold an account with a UK bank or building society, it is worth checking with them to see if they have any products suitable for you.

Products in your cash ISA charts do not accept transfers in. Where can I find institutions that accept ISA transfers?

Most top paying cash ISAs do not permit transfers in. A list of those institutions which accept transfers in from other providers can be found by selecting "transfer an existing ISA" in the search for a savings account section.

What does AER mean?

AER stands for Annual Equivalent Rate. This rate is quoted on interest paid on savings and investments. Interest paid monthly, quarterly or half-yearly represents a higher true rate than the same stated interest rate paid annually. AER allows you to compare interest rates and reflects not just the amount of interest but also how often it is paid. It shows what your interest return would be if the interest was compounded and paid annually instead of more frequently.

Why is the gross rate different to the AER rate?

The gross and AER rates will be the same if interest is paid annually and there is no introductory bonus or if there is a bonus it is paid for 12 months.

The Gross rate will be lower than the AER rate if interest is paid more frequently than yearly i.e. monthly. The Gross rate will be higher than the AER if there is an introductory bonus for less than 12 months.

What does wef mean?

Wef means "with effect from", the date from which the rate becomes effective.

Do children automatically get their interest paid gross?

No. When opening an account for a child an R85 form must be completed to ensure any interest earned is paid gross.

What's the difference between an instant access account and a no notice account?

For instant access accounts, the account holder must be able to obtain cash immediately either at a branch or via an ATM. No notice accounts are usually post, telephone or Internet operated accounts and although no notice is required to withdrawn funds, the money is usually transferred through the bank system (BACS), or a cheque is issued.

Is my money safe?

Moneyfacts lists all major institutions that apply to us for inclusion and meet our listing criteria. While Moneyfacts does not endorse any individual institution, we do insist that all companies listed in our charts have met with our requirements.

All institutions shown on Moneyfacts.co.uk must belong to the relevant Deposit Compensation Scheme, so your savings will be protected if the bank or building society goes bust.

Depositor protection limits:

Financial Services Compensation Scheme: 020 7892 7300
Deposit taking firm: The limit is 100% of the first £50,000 per individual. Joint accounts have protection of £50,000 per person, i.e. up to £100,000 for the account. The protection applies per institution so be aware of which banking brands operate under which banking licences. Moneyfacts.co.uk has the definitive list of which bank owns which brand so you can keep fully protected.

Insurance firm: The first £2,000 of an insurance claim or policy is covered in full, plus 90% of the balance. Compulsory insurance claims are covered in full.

Investment firm: The limit is £48,000 (100% of the first £30,000 and 90% of the next £20,000) per individual.

Full details can be obtained online from www.fscs.org.uk

European Union deposit takers (including deposits with UK branches of those institutions): Up to 90% of first €22,222 per individual.

Gibraltar Deposit Guarantee Scheme: 100% of deposits which qualify for compensation, subject to a maximum of the sterling equivalent €50,000.

Isle of Man: Protection of up to £50,000 of net deposits per individual depositor.

Guernsey: Guernsey Banking Deposit Compensation Scheme. Up to £50,000 per individual.

Jersey: No depositor protection schemes.