Saving abroad

CKhalvashi

Hey all

Just a quickie on a little plan that I have here regarding international savings.

We keep about £20k in cash at 3.12% (as I seem to have mentioned before), and are getting about 8% ‘interest’ on investments at this time.

Well, I’ve just got back from Georgia for half term, and one thing that did come to my attention was the interest rates.

Not wanting to cheat the treasury, what’s the easiest way of doing this. There is no ‘savings tax’ in Georgia. Latest interest rates can be found here, and I am a 40% taxpayer. This is one of Georgia’s strongest banks, and I know of the FSCS risk on this.

It’s more a currency thing (we’d save in GEL and GBP, rather than just GBP)

CK

Aegis

Bear in mind that you will get no cover from the UK government if the bank goes bust and you will still be liable for UK income tax on the interest you receive, so not paying would be tax evasion.

CKhalvashi

Aegis wrote: »

Bear in mind that you will get no cover from the UK government if the bank goes bust and you will still be liable for UK income tax on the interest you receive, so not paying would be tax evasion.

Thanks Aegis. On 8.5%, it wouldn’t bother me paying the UK govt. 40% of the interest, it’s still better than any UK deal.

Does the GEL work on the rate on the day interest goes in, or the rate the money is brought into the UK (which it wouldn’t be, as it will also be servicing a Georgian mortgage), or the rate on April 5th (all should have Exchange in front of them)

That’s my major concern.

koru

As you seem to be aware, the interest will be subject to UK tax (assuming you are UK tax resident and UK domiciled). Just declare it in your UK tax return. You should be able to offset any Georgian tax against the UK tax that is payable.

I can see why those rates look attractive, although they seem so attractive that I would be worried that they fall into the “too good to be true" category. I have no idea what is an appropriate interest rate for Georgian currency, but the rates for US dollars, euros and British pounds are way higher than you can earn for savings in the home country of each of those currencies. If this Georgian bank is paying such a huge interest rate premium, it says to me that they are trying to compensate for a very large risk. I wouldn't want to put my savings with them unless I was absolutely sure that I understood why they are willing to pay such a large amount of interest.

CKhalvashi

koru wrote: »

As you seem to be aware, the interest will be subject to UK tax (assuming you are UK tax resident and UK domiciled). Just declare it in your UK tax return. You should be able to offset any Georgian tax against the UK tax that is payable.

I can see why those rates look attractive, although they seem so attractive that I would be worried that they fall into the “too good to be true" category. I have no idea what is an appropriate interest rate for Georgian currency, but the rates for US dollars, euros and British pounds are way higher than you can earn for savings in the home country of each of those currencies. If this Georgian bank is paying such a huge interest rate premium, it says to me that they are trying to compensate for a very large risk. I wouldn't want to put my savings with them unless I was absolutely sure that I understood why they are willing to pay such a large amount of interest.

Yes, all my tax is UK-based at present.

TBC is known as a large Business bank in Georgia, having acquired HSBC last year (The Georgian arm, not the entire bank).

To place funds with them for 24 months will enable them to lend at near 18% APR, and I know that they have some securities in gold, also.

At the same time, £1 equalled about 6 GEL when I first came to the UK. This is no longer the case. You’re looking 2.4 GEL if you’re lucky. The same has obviously happened (although to a lower extent) with other currencies at the same time. The key to Georgia largely escaping the recession (unemployment is still high, but had reduced significantly) is low taxes, a high base rate (7.25%) and international growth. In fact, our Holdings group (which has just gone to PLC, but not public and no plans to float publicly) owns 2 Georgian companies, which are MUCH stronger than the European counterparts (40% of our total t/o)

I am a Georgian national and my parents (left Georgia in 1990 and never returned) were with TBC back then, proving that this model is working. I’ve made a personal call to a minister from the MoF (UK Equivalent = Treasury) this afternoon, and TBC currently has a rating that would put RBS to shame, so I’m personally confident that a 25,000 GEL protection is adequate for ME, if not for others.

My mind is at rest, I just wanted to know what others thought before plunging it.

CK

innovate

CKhalvashi wrote: »

TBC is known as a large Business bank in Georgia, having acquired HSBC last year (The Georgian arm, not the entire bank).

A large bank buying another large-ish bank is no guarantee whatsoever that the business is sound. As several recent examples have shown.

I am not sure there's much else I can add since you seem to pretty much have made up your mind already.

CKhalvashi

innovate wrote: »

A large bank buying another large-ish bank is no guarantee whatsoever that the business is sound. As several recent examples have shown.

I am not sure there's much else I can add since you seem to pretty much have made up your mind already.

The point that I was making is that the business model works.

If you’d like to offer advice to stop me doing something I’d regret, it will by all means be taken into consideration with OH.

Cook_County

As a non-dom you could of course elect to claim the remittance basis and not report Georgian rental and interest income to HMRC but simply pay the £30,000 charge (or the £50,000 charge when it comes into effect).

RetiredInThailand

CKhalvashi wrote: »

TBC is known as a large Business bank in Georgia, having acquired HSBC last year (The Georgian arm, not the entire bank).

Or, to put it another way, maybe HSBC decided that Georgia was somewhere they really didnt want to be and so disposed of their Georgian arm to the first mug who made an offer and got on the next train out?

Just looking at those interest rates indicates that there is something seriously dodgy happening. No safe bank anywhere in the world currently pays rates even close to those.

darkpool

LOL!!!

the bank is offering the thick end of 10% annual interest on sterling!!!!

What type of bank pays that type of interest rates? It smells of con to me.



Term Deposit Interest Rates

Deposit Term

USDEURGBPGEL

3-5 months
6.00%+1%
6.00%+1%

5.75%+1%

9.50%+1%
6-8 months
7.00%+1%
7.00%+1%

6.75%+1%

10.50%+1%
9-11 months
7.50%+1%
7.50%+1%

7.25%+1%

11.00%+1%
12 months
8.00%+1%
8.00%+1%

7.75%+1%

12.00%+1%
13-14 months
8.25%+1%
8.25%+1%

8.00%+1%

12.25%+1%
15-17 months
8.50%+1%
8.50%+1%

8.25%+1%

12.50%+1%

18-23 months8.75%+1%8.75%+1%8.50%+1%12.75%+1%24 months9.00%+1%9.00%+1%8.75%+1%13.00%+1%

atush

innovate wrote: »

A large bank buying another large-ish bank is no guarantee whatsoever that the business is sound. As several recent examples have shown.

I am not sure there's much else I can add since you seem to pretty much have made up your mind already.

I am not up on Georgia lately, apart from on the news about political instability and mini wars with Russia some years back.

But, given HSBC is no shrinking violet, I too think the fact that they are happy to leave the Georgian market isn't really a good sign.