UK based interest bearing foreign currency savings accounts

Python4all

UK High St banks offer zero interest rates on foreign currency savings accounts held by UK residents. Some minor banks offer (higher) market rates, but they are minor (albeit UK regulated) banks and carry a risk (for balances over the equivalent of £85k). The High St banks offer interest bearing accounts to UK expats and non-UK residents, but not to UK residents. Clearly this is anomalous. Is there another route for a UK resident to hold an interest bearing foreign currency savings account in a major (and less risky) bank based in the UK? 

cwep2

Hi,
I have been doing this myself. It's not been easy and best option changes.

Simplest option: Revolut - they have "vaults" which are equivalent to savings accounts, the USD and EUR Vaults are currently held at Investec and have FSCS protection up to £85k. You are limited to a total of £85K equivalent between the two of these. Current rates 2.14% for Eur and 3.54% for Usd. I have a Metal plan which costs around £120 per year but you get higher rates as part of this as well as other benefits. You can easily transfer money and the FX transfers are done at very competitive rates and are quick and transfers to/from UK GBP accounts are via faster payments. You get a debit card you can use for spending and in ATMs (subject to limits on how much you can withdraw per month) so easy to use for spending abroad as well.

Second best option: Interactive brokers Pro. They pay various rates see: (https://www.interactivebrokers.co.uk/en/accounts/fees/pricing-interest-rates.php) but Usd is 4.58% Eur is 2.60% but many other currencies as well. I think you only get interest on balances >$10k so maybe not much for small amounts. The USD is protected under the US system ($250k I think), not sure about other currencies though. This is designed for trading/investing though and people have had accounts closed if they just deposit cash and in particular if the do FX trades just to withdraw.

Third best options: Government bonds. If you have Usd then Interactive Brokers also have a very wide selection of US treasuries and you can easily enough get >5% on various maturities out to 6 months. For Eur government bonds I use Fineco - Italian bank but UK subsidiary has FSCS protection, investment platform much like IB but with wider selection of Govt bonds, you get a whole choice in Europe would look at Germany, Italy, France, Spain, Netherlands etc. Obviously if you are invested in these your credit risk is with the bond issuer, but if it's the US or European sovereign it's basically as safe as FSCS - ultimately both UK Gilts and the FSCS are underwritten by HM Treasury = same credit risk. Yes there's talk of debt ceiling issues in US, but honestly they are not gonna default on Treasuries.

Fourth option which I have not done myself: Flagstone have offered access to HSBC Expat accounts even to onshore UK clients, they were offering 4%+ for Usd a couple of months ago. Opening process too much of a faff, didn't go through with it in the end. 

Python4all

Many thanks for such a fulsome reply. I will explore the options.

TheGreenFrog

I used IB for years for currency exchange and holding USD cash balance (was getting paid in USD but GBP liabilities). No issues then but stopped a few years ago.  On buying foreign currency bonds you need to beware CGT if you are a UK tax payer.