Wealthier investors who have stashed their cash in offshore bonds could lose their nest eggs after the schemes became embroiled in the Icelandic banking crisis.

British investors have as much as £5 billion in the schemes, most of which have a minimum investment of £100,000 and are often used by people who intend to move or retire abroad.

Aegon Scottish Equitable International has told financial planners it cannot guarantee the investments of some of its offshore bondholders, which were invested in Kaupthing Singer & Friedlander Isle of Man, which went into liquidation last week.

The bank is a subsidiary of Iceland’s Kaupthing, which was nationalised by the Icelandic government.

Investors have been left at the mercy of the liquidator after the government failed to commit to guaranteeing deposits in the offshore bank.

It is understood offshore bonds provided by Axa and Canada Life are also invested in Kaupthing Singer & Friedlander Isle of Man.

The British arm of the bank was bought by ING Direct, the Dutch bank, last week. However, Isle of Man deposits and investments were left out of the deal and now require the protection of the Isle of Man compensation scheme.

The Isle of Man government last week voted to increase the deposit protection to £50,000.

However, advisers said that compensation would be negligible as it is limited to one claim per firm — regardless of how many policyholders have bonds linked to the bank.

Dean Blake of Grant Thornton, the accountant, said: “We were hoping that the parent company in Iceland, Kaupthing, would allocate the necessary funds — but that hasn’t happened.”

He added: “We hope the liquidator understands that this is not just an institutional investment — these are real people’s retirement savings.”

Offshore bonds have soared in popularity following the crackdown by Revenue & Customs (HMRC) on those who fail to declare interest earned on offshore savings accounts.

Offshore bonds allow investors to take 5% income a year and to defer tax paid until the bond is encashed.

Mike Warburton of Grant Thornton said that if offshore bondholders were able to take profits they might be forced to pay income tax because the Revenue was likely to consider the bonds had been encashed.

Aegon Scottish Equitable International told advisers: “The Financial Service Compensation Scheme does not protect deposits with Kaupthing Singer & Friedlander. It is too early to know what the outcome of the liquidation will be.”

British savers were deserting their offshore savings accounts in Jersey, Guernsey and the Isle of Man last week as fears grew for the safety of banks based there, including Kaupthing Singer & Friedlander Isle of Man, which took over Derbyshire building society’s offshore business in December.

Experts warned that those who repatriate funds to the UK could be ensnared in the Revenue’s investigation into unpaid tax on offshore savings.

Warburton said: “This event might well assist HMRC in their search for offshore savings. If you are UK domiciled and you have a savings account with straight-cash terms you should have been declaring your interest.”

The Revenue said: “We know a small minority of taxpayers seek to evade UK tax through the use of offshore funds. Ensuring that funds transferred into a UK account from an offshore source have been properly accounted for is a part of our day-to-day business.”

Savers with accounts operated by Landsbanki, the failed Icelandic bank, in Guernsey feared they might not get their money back after the UK Financial Services Compensation Scheme confirmed it would not cover them.

Deposits with Landsbanki’s UK-based subsidiary, Heritable Bank, have been bought by ING Direct, the Dutch bank, while UK customers of Icesave, part of Landsbanki, have had their deposits guaranteed by the Treasury.

There is no deposit protection scheme in Guernsey or Jersey. Those with deposits in Landsbanki Guernsey will have to rely on the Guernsey government to reimburse their savings.

The bank’s website says: “The Administrator will be working towards an orderly repayment to depositors . . . [but] we cannot say how much or when.”

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