Sterling Currency Fund

(Also called International Reserves, Multicurrency Reserves)

A fund where you pay in and withdraw like a bank and building society postal account but technically you buy and sell its shares. There are two main types which have different tax treatment. Distributor funds pay out interest half-yearly; no tax is deducted from the interest but it counts as your income in the tax year it is paid. Accumulation funds accumulate interest without deduction of tax. No tax is payable until you dispose of the shares (or switch to another fund). Then the 'gain' on the shares is liable to UK income tax in the tax year of the disposal or switch .

Who can invest Anyone except US permanent residents.

How worthwhile Interest rates are generally poor, especially for large amounts. Taxpayers can use an Accumulation fund to defer tax. Consider instead of Distributor funds National Savings Investment Account, Offshore Bank Instant Access Account. If you want to invest in foreign currency, see Offshore Bank Foreign Currency Account or Offshore Bank Instant Access Account or Offshore Bank Notice Account.

Minimum None.

Maximum None.

Suitable Lump sums.

Money back Up to 4 to 7 days. Switching to foreign currencies, see Offshore Single Foreign Currency Fund, on demand. If you leave the shares in your will, your executors will have to obtain probate abroad unless the shares are in joint names.

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 by cheque to you; to a bank account or relnvested in extra shares.

Tax Not deducted. If interest distributed: Taxpayers are liable to income tax on it; gains on shares sold, or switched to another currency, are liable to capital gains tax. If interest accumulated: It need not be declared until you sell or switch to another currency, when gains (on exchange rate changes) as well as interest are liable to income tax.

Fees to payCheck before you invest. Initially: none. Yearly (including custodian fees): Up to 1¼%.

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. There are no compensation schemes unless the fund is recognised which most no longer are.

How to invest Not recommended.

Where from Fidelity.

Other types of Offshore Funds
Recognised Offshore Fund Management Companies
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Last updated 14 October 2004.