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Funds
Recognised Offshore Fund Management
Companies
OFFSHORE
(Also called International Reserves, Currency Funds)
A sub-fund of an investment company where you pay in and withdraw like a bank and building society postal account but technically you buy and sell its shares. Each sub-fund invests in one currency and the combined deposits from small investors are re-invested in bank and other deposits of less than 12 months.
With the advent of the Euro and lower interest rates in all currencies, these funds have generally either closed or reduced the currencies available to Sterling, Euro and US Dollar. Also the remaining funds have become unrecognised so are no longer eligible to some compensation in the event of fraud or mismanagement.
Who can invest Anyone except US permanent residents.
How worthwhile Taxpayers can use an accumulation fund to defer tax. The funds have cut back on the range of currencies available. For £ sterling see Offshore Sterling Currency Fund. You should be able to get a better interest rate in US$ or € from anOffshore Bank Foreign Currency Account or Offshore Bank Instant Access Account or Offshore Bank Notice Account. See also Bank Cash Card Account.
Minimum None.
Maximum None.
Suitable Lump sums.
Money back Up to 4 to 7 days. Switching on demand. You can hold shares in joint names to avoid probate abroad.
Interest Variable. Calculated daily.
Interest paid Interest is either accumulated to increase the value of the shares or distributed. If distributed it can be paid in the foreign currency, paid in £, or re-invested in extra shares.
Tax Not deducted. If you are a UK resident and a taxpayer you are liable to pay tax on the income. Accumulation funds: If the fund accumulates more than 15% of its income, UK residents are liable to income tax instead of capital gains tax on any gain you make when you dispose of your shares or switch to another sub-fund. Distributor funds: Capital gains on disposals or switches are liable to capital gains tax.
Fees to pay Check before you invest. Initial: None. Yearly (including custodian fees): Up to 1¼%. With a yield of 4%, this fee is equivalent to a tax rate of 31%
Passbook None. Statement issued with each transaction.
Children Under 18 shares should be held in an adult's name and may be designated with the child's name or initials.
Risk Full value of original investment plus interest on withdrawal in currency chosen; if you convert to £ the value may have risen or fallen with the exchange rate. There are no compensation schemes unless the fund isrecognised which most no longer are.
How to invest Not recommended.
Where from Insight Investments and Fidelity.
Other types of Offshore
Funds
Recognised Offshore Fund Management
Companies
Investment Trusts
Unit Trusts
Contents
Last updated 14 October 2004.