If you are not prepared for any risk on either the initial capital invested or your growth portion of your investment, then your best solution is finding the best bank rates for your money with the least liability to tax. If you are not liable to tax on money held in an offshore bank account (ie UK non-domicile or expatriate worker) then investing into a bank domiciled in one of the major financial jurisdictions should offer the greatest security. Donīt expect the same rates you would find on the high street. Offshore banks do have higher fees and thereby rarely offer the best rates, however if you look hard enough then you can be pleasantly surprised. In our experience AIB Offshore usually offers one of the best offshore bank rates on Sterling, but to make sure you can check here to see the current list of the best offshore bank rates available.
Bank transfers and account fees will also eat away at the net returns from your account, so it is important to check the costs and if possible, even adjust your use of the account accordingly.
Different jurisdictions have different disclosure regimes. For example Luxembourg, Isle of Man and Jersey all levy a withholding tax rather than automatic disclosure for EU residents. You can opt for disclosure if you prefer or if you can satisfy them that you are a UK non-domicile, then neither disclosure or withholding tax will apply as you are outside the effects of the EU savings directive. If you are non-EU then again this does not affect you.
Investor protection in Luxembourg effectively offers 100% security for bank deposits. Isle of Man has a more typical investor protection scheme of similar levels to the UK and in essence will not fully protect investments above a certain level. There are also some banks such as Abbey National International in the Isle of Man that offer implicit guarantees from their parent company. In terms of widely recognised, highly capitalised A rated or higher banks, the comparable risk to bank deposits is very low, however failures do happen as we all remember BCCI and Barings.
If you can afford some risk with either your capital and or any growth portion in return for the good chance of building your capital well above bank rates, then we recommend you invest into offshore investments.