# Post Office - Savings Certificate - How Safe



## PDCAT

Hi Folks

About 6 months ago, i placed approx 200K in the 5.5 year Post Office Savings Certificate (all my Wife & My savings).

Just wondering, how safe is this money at the moment, now that the IMF are bailing us out. If i remove this money, i will lose any interest that i have accrued and i don't know where else is save to deposit it.

However, with the IMF bailout, does this mean that my money is safe for the moment (at least in short/medium term).

What would have to go wrong for this money to become unsafe in the post office?

Thanks for you help. As you can imagine, like everyone else, worried that all my savings are at risk and that i should be doing something about it.


----------



## legal33

As I understand it, interest is added every 6 months for 5.5 year an post certs so you should collect €2,000 (1%) on €200,000 of certs. If you withdraw before the 6 months is up you get no interest. 

Your money is safe as long as there is no sovereign default. Most commentators believe the government will accept the IMF / EU deal despite the fact it is unaffordable (quarter of a trillion) in the long term. If Ireland accept the deal there is no immediate necessity for a soverign default as we will have €85 billion to play with. However other commentators believe taking on the amount of debt the IMF / EU will provide is so damaging that it would be better to default now. Nobody will know for sure until the deal is signed and the budget has to be passed in 2 weeks for that to happen I think, although it now seems the budget will be passed. 

Ireland may be backed into an even tighter corner in 2 to 3 years and have no option but to default. 

As I understand it, there are different ways to default. If Ireland just defaults on the bank debt then there would be no soverign default and an post certs are safe. That supposes that negotiations next year manage to separate bank debt from soverign debt. At the moment bank debt and soverign debt is all the one because of the blanket guarantee from september 2008.

In these times it's better not to have all your eggs in one basket because things can change so quickly. If you are under 65 (or is it 66?) the advantage of an post is that they are DIRT exempt and you are getting more interest if you hold out for the full 5.5 years. A lot of peoples' concern at the moment is holding onto what they have rather than take a risk for an extra percent interest. But bank interest rates are rising for savers at the moment so if you get good rates in a few weeks there may not be that much difference between an post and the banks. Of course if you are DIRT exempt you may soon get a better rate in some banks.

Popular options here seem to be Nationwide UK Ireland because they are guaranteed by the UK scheme although if Ireland goes down who knows what country will be able to cover what. The UK banks are heavily linked to ours.

If your 6 months are up I would advise taking out €100k and spreading it around. I think people who have it spread around are sleeping easier at night.

I wouldn't see any immediate threat to your money but there is no advantage waiting for another 6 months because you would get a better rate in the bank. 

I would consider it likely that an post deposits will be affected within the next 3 to 4 years because of a soverign default but that's only my personal opinion. In that situation you may not lose all your money but people with €2000 in the post office may be more protected than people with €200,000. Even in the case of a default, post office deposits over a certain amount eg €5,000 may be frozen for 2 or 3 years rather than deleted. I have no idea what would happen in that scenario.

Sit down and do careful research and have your eggs split up by christmas.


----------



## Lightning

Great post Legal33. 

An Post deposits fund the national debt via the NTMA. A default is probable in the medium term according to the CDS market. 

I would not hold savings with the NTMA right now.


----------



## MontyH

*Where is a safe place for savings*

Hi guys great posts, does anyone know where would be a safe place to put savings in the event of a joint default (mattress excluded) or do we just wait and hope?

yours hopefully


----------



## kdoc

Can someone help me here. I don't really understand why An Post savings should be affected if the government default. Presumably they will be only defaulting on the bond holders and perhaps the loans from the ECB?


----------



## frankmac

kdoc said:


> Can someone help me here. I don't really understand why An Post savings should be affected if the government default. Presumably they will be only defaulting on the bond holders and perhaps the loans from the ECB?


 

Maybe those of us with post office savings are in effect bond holders?


----------



## kdoc

Frank you reckon they just forgot to give us the title.


----------



## oldtimer

CiaranT said:


> Great post Legal33.
> 
> An Post deposits fund the national debt via the NTMA. A default is probable in the medium term according to the CDS market.
> 
> I would not hold savings with the NTMA right now.


So your advice would be to withdraw Saving certificates and Saving Bonds? What about the prize bonds - should they be cashed in, many people have thousands in them? and what about the recently advertised Solidarity Bonds - are they as high risk as Saving certificates?


----------



## cork

The likelywood of a default any time soon is small.

Am I wrong assuming this?


----------



## Lightning

kdoc said:


> Can someone help me here. I don't really understand why An Post savings should be affected if the government default. Presumably they will be only defaulting on the bond holders and perhaps the loans from the ECB?



"An Post savings" are really NTMA savings (National Treasury Management Agency). They are State Savings that are used to purchase government bonds via the NTMA. The balance sheet of the NTMA gives more information. 

They carry the same guarantee as government bonds. 

The ECB or the ICB does not provide liquidity to An Post or the NTMA or to State Savings.



frankmac said:


> Maybe those of us with post office savings are in effect bond holders?



Kind of. Except bond holders get paid 9% and State Savings depositors get paid a fraction of this.



oldtimer said:


> So your advice would be to withdraw Saving certificates and Saving Bonds? What about the prize bonds - should they be cashed in, many people have thousands in them? and what about the recently advertised Solidarity Bonds - are they as high risk as Saving certificates?



Personally, like most investors, I think the medium term risk of this state defaulting is very high. Consequently, I would not personally hold any State Savings products. They all carry the same level of risk.



cork said:


> The likelywood of a default any time soon is small.
> 
> Am I wrong assuming this?



Short term, if the IMF agreement is approved by the Dail, the risk is low. 

Medium term, the risk is very high that the state will default. The CDS market implies that a default is more probable than not.


----------



## oldtimer

Many people have money invested in An Post products and any default would be catastrophic. The advice given on this forum is very much respected and acted upon. Can I take it the advice now sent out is (1) do not purchase An Post saving products? (2) cash in any An Post products?


----------



## pudds

Yesterday after the 1st year annivesary of 3yr savings cert I got my cheque and nice bit of interest....but the worrying was just too much 4me..mind you I only had small amount 15k but means a hell of a lot in my situation to have access to it when needs must as it will.


----------



## Leper

An Post Savings Certificates are as safe as houses and are guaranteed by the Government. So . . . Oh Good J.....!


----------



## kdoc

Are the state savings products any safer since the bailout announcement?


----------



## Duke of Marmalade

[broken link removed] as at September was 11.8Bn out of a total National Debt of 88Bn (some say 250Bn). People should get real. We hear talk of bondholders getting burned but nobody (outside AAM) is talking about depositors getting burned even though in theory they rank equally. 

IMHO An Post savings will be the very last to suffer. They are deadly safe, for if we are truly unable to honour 11.6Bn after having defaulting on c. 250bn, well that looks like some sort of nuclear war event, hardly matters.  Comparisons between the 9% paid to bondholders and 3.5% paid to Savings are not relevant.  The former are rated A at best, the latter IMHO are rated AAAAAAAAAAAAAAAAA.


----------



## Lightning

Duke of Marmalade said:


> [broken link removed] as at September was 11.8Bn out of a total National Debt of 88Bn (some say 250Bn).



Good spot with that stat. An Post NTMA deposits make up a huge portion of the unsustainable Irish national debt. 



Duke of Marmalade said:


> People should get real. We hear talk of bondholders getting burned but nobody (outside AAM) is talking about depositors getting burned even though in theory they rank equally.



NTMA deposits are different. They effectively/de facto are the bond holders. Your deposit buys Irish state sovereign debt. 

There is no provision in legislation to segregate between different types of sovereign debt. 

In the medium term, the market thinks, it is probable that we will default. It is difficult to see how segregation will occur if/when we default.



kdoc said:


> Are the state savings products any safer since the bailout announcement?



Yes, they are safer, for the medium term, now that we have IMF funds.


----------



## Duke of Marmalade

CiaranT said:


> There is no provision in legislation to segregate between different types of sovereign debt.
> 
> In the medium term, the market thinks, it is probable that we will default. It is difficult to see how segregation will occur if/when we default.


There is currently no provision to differentite between bondholders and depositors yet everyone seems to accept that there may come a time when we would default on the former but never the latter. Changes of legislation along these lines are clearly plausible. If you or I said we are not pauing our ESB bills but we will pay our Bord Gas bills would not get away with that, ESB could sue us in law as being equal creditors with Bord Gas. But the government writes the law, they can easily say we will not pay bondholders but we will pay An Post.


----------



## Black Rock

*NTMA State Savings are a component of the sovereign debt of Ireland*

The term _"Post Office Savings"_ is not accurate - if you check the published annual accounts of the post office (An Post) you will notice there is no statistics on "Post Office Savings" at all, as the savings products offered by the National Treasury Management Agency (*NTMA*) to personal savers do not form any part of the financial statements of An Post. 

The reason for this is that the post office is an agent of the NTMA (National Treasury Management Agency) in respect of State Savings. The post office provide a counter service to collect savings money on behalf of the Government and the post office immediately, every day, hand all savings money over to the Government under the management of the National Treasury Management Agency where it is known as "_*NTMA State Savings*_" which includes Prize Bonds.

_"NTMA State Savings_" are accounted for in the annual accounts of the National Treasury Management Agency (NTMA) and are a component of the sovereign debt of Ireland. 

In line with the normal practice in the sovereign debt markets Ireland has never issued any debt with either a preferred status or a subordinated status relative to any other debt it has issued, i.e. all debt issued by Ireland ranks pari passu and enjoys identical status. 

Therefore _"NTMA State Savings_" products rank equally with all other components that make up the sovereign debt of Ireland. 

The NTMA's website ( www.StateSavings.ie) has a brochure on the home page which explains everything and lists all the "_NTMA State Savings_" products which include Prize Bonds, Savings Bonds, Savings Certificates, Instalment Savings, Deposit Accounts (such as the Ordinary Deposit Account and the Deposit Account Plus) and National Solidarity Bonds.


----------



## Lightning

Great post BlackRock. 



Black Rock said:


> Therefore _"NTMA State Savings_" products rank equally with all other components that make up the sovereign debt of Ireland.



That is the key and most important single consideration that anyone needs to give with this product.


----------

