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I'm a British national, currently working in Ireland and shortly moving to US on an internal transfer. I have some money in the UK which I intend to use for a property deposit when I return in ~3 years. It's in high street savings accounts (and an ISA, which as a non-resident I can't contribute to any further) at the moment which pay very little. I'm losing to inflation.

What strategy should I consider to retain the value of this money while I'm abroad, bearing in mind I'm reasonably risk-averse (it's not an investment, I just want to maintain its value against inflation; a return is a bonus) and I'll have to pay US tax on interest?

Most high street banks offer offshore accounts where interest is paid without tax deducted but these aren't (AFAIK) protected by the FSA. As far as I can see most normal high street accounts/fixed bonds aren't available to non-residents.

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    Is investing in UK government's inflation indexed bonds a viable option for you ? And British government looks quite far away from defaulting on its bonds. – DumbCoder Nov 1 '11 at 9:56
  • To follow up on the index linked guilts you could convert your ISA to invest in those as guilts can be held in a stocks and shares ISA - the other option woudl be convert your cash ISA into a stocks and shares and invest in 3 or 4 of the big generalist equity/income IT's which is going to protect capital much better than cash will – Neuromancer Dec 14 '13 at 13:32
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Normal high street accounts certainly are available to non-residents. I have several, and I haven't been resident in the UK for fourteen years. However you do need to open them before you leave. They need identification. Once you have one open, the same bank should be able to open other accounts by mail.

The disadvantage of course is that you will pay tax on your earnings, and while you can claim it back that's an unnecessary piece of work if you don't have other UK earnings. I would take the risk of an offshore account, assuming it's with a big reputable bank - the kind that are going to be bailed out if there is another collapse.

An alternative might be a fixed term deposit. You lock up your money for three years, and you get it back plus a single interest payment at the end of three years. You would pay nothing in tax while you were gone, but the whole interest amount would be taxable when you got back.

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