# RTE article today - savings rates



## podgerodge (27 Nov 2022)

Can someone explain the maths to me here, or am I reading the example out of context - I'm confused anyway.


"Permanent TSB announced a new product in recent weeks offering 1.25% on lump sums of €5,000 and higher for a period of 5 years.
That would generate a return over that period of around €1,130, which is quite a decent yield in the context of the current deposit rate environment."










						Rates rising - why am I not making money on my savings?
					

For years, interest rates have been at rock bottom creating a relatively favourable environment for borrowing. Now that rates are rising, savers could have reasonably expected to finally start making a return on their deposits. But it has yet to show any signs of materialising.




					www.rte.ie


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## mct1 (27 Nov 2022)

"...quite a decent yield" is understatement of the year!

Someone got their sums wrong or else it's a misprint. I'd estimate €17,500 over 5 years would give you approx that return.


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## ClubMan (27 Nov 2022)

Looks completely incorrect.
€5k @ 1.25% compounded annually for 5 years yields a return of €320 gross or €213 after DIRT.


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## llgon (27 Nov 2022)

I thought that not mentioning Raisin and the rates available there was a huge omission.


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## podgerodge (27 Nov 2022)

Yes, had thought a couple of hundred at best.  I was trying to see if they had referred to higher deposit examples earlier, which he did I think, but can't align it to this paragraph.


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## NoRegretsCoyote (27 Nov 2022)

Just more proof that most journalists and editors are innumerate.


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## Brendan Burgess (27 Nov 2022)

NoRegretsCoyote said:


> Just more proof that most journalists and editors are innumerate.



No. Just that there is a typo in an article published/updated on Sunday which was not proof-read as carefully as it should have been. 

I suspect that they meant to say "on a sum of..." and this got edited out.

Brendan


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## NoRegretsCoyote (27 Nov 2022)

Brendan Burgess said:


> and this got edited out.


Okay, so just editors innumerate then


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## peemac (27 Nov 2022)

NoRegretsCoyote said:


> Just more proof that most journalists and editors are innumerate.


When you look at the "mortgage advice" some of them provide, your statement is sadly very correct.

When the Irish times allowed comments, I pointed out glaringly poor advice by one of their reporters on almost every mortgage query.


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## Brendan Burgess (28 Nov 2022)

Even Bonkers seems to be innumerate


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## podgerodge (28 Nov 2022)

That's the same figures as RTE article no?? Perhaps he lifted it from Bonkers


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## ClubMan (28 Nov 2022)




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## noproblem (28 Nov 2022)

Brendan Burgess said:


> Even Bonkers seems to be innumerate
> 
> View attachment 6878


To a simple person like myself I'd say that's a wonderful return of 1.25% on €5,000.00 over 5 years .
Going on the above you'll get €22,642.40 for €100k?
They're going to be very busy with that offer.


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## Lisboa (28 Nov 2022)

Bonkers have corrected their error and now have it as €320.41

RTE have also edited their article; 



> Permanent TSB announced a new product in recent weeks offering 1.25% on lump sums of €5,000 and higher for a period of 5 years.
> 
> That would generate a return over that period of at best a few hundred euro which would then be subject to DIRT at 33%.


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## podgerodge (28 Nov 2022)

Good, I had emailed him yesterday, perhaps that alerted him, and he ran off to Bonkers to ask them what they were at


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## TOMTOM123 (28 Nov 2022)

ClubMan said:


> Looks completely incorrect.
> €5k @ 1.25% compounded annually for 5 years yields a return of €320 gross or €213 after DIRT.





Lisboa said:


> Bonkers have corrected their error and now have it as €320.41
> 
> RTE have also edited their article;


night  school might help  hopefully  and  maybe  aib  and bank of ireland  will  increase the deposit rates  as competion


podgerodge said:


> Good, I had emailed him yesterday, perhaps that alerted him, and he ran off to Bonkers to ask them what they were at


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## noproblem (28 Nov 2022)

TOMTOM123 said:


> night  school might help  hopefully  and  maybe  aib  and bank of ireland  will  increase the deposit rates  as competion





Lisboa said:


> Bonkers have corrected their error and now have it as €320.41
> 
> RTE have also edited their article;


Raisin will get you €839.00 over the same period with the same amount


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## tomdublin (29 Nov 2022)

Most financial "journalists" these days spend their time rehashing corporate press releases and might not have heard of Raisin.  Also, I suspect some might be planning to apply for jobs at bank PR departments once their publication has gone bust and thus want to ingratiate themselves by not mentioning foreign competitors.


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## jim (29 Nov 2022)

noproblem said:


> Raisin will get you €839.00 over the same period with the same amount



There ya go now @michaeloconnor2


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## Brendan Burgess (29 Nov 2022)

tomdublin said:


> might have not have heard of Raisin.



Deposit rates are not important to most people.  The differences are not that material.  If someone asked me about deposit rates, I wouldn't have thought of Raisin.

I would say to check askaboutmoney to see what rates were available.  But I would seriously question whether having large sums on deposit and fixed for 5 years was a good idea.

For this particular article, the journalist seems to have checked Bonkers and spoken to a few people.  Maybe they didn't talk about Raisin to him?    In any event, it is certainly not a rehash of a press release. 

Brendan


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## jim (29 Nov 2022)

Brendan Burgess said:


> Deposit rates are not important to most people.  The differences are not that material.  If someone asked me about deposit rates, I wouldn't have thought of Raisin.
> 
> I would say to check askaboutmoney to see what rates were available.  But I would seriously question whether having large sums on deposit and fixed for 5 years was a good idea.
> 
> ...


I don't think anyone would claim that it would be a fantastic idea, all else equal, to put your money on deposit for 5 years.

But in certain situations, and absolutely in the context of deposit rates - Raisin rates currently represent a thoroughly decent option.

For example, if you have paid down your mortgage, fully max out pension bandwidth and have rainy day fund then it makes sense, to seek the best deposit rates out there. 

100k on deposit in Irish Bank versus with raisin equates to a substantial difference. Why wouldn't you set up a Raisin a/c? Tis easy!


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## Brendan Burgess (29 Nov 2022)

jim said:


> 100k on deposit



You must be expecting a lot of rain. 

Brendan


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## noproblem (29 Nov 2022)

Brendan Burgess said:


> You must be expecting a lot of rain.
> 
> Brendan


Who isn't, but I bet you can't come up with a better alternative?


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## Brendan Burgess (29 Nov 2022)

I would not have €100k in  a rainy day fund. 

And I would not have any large amount of cash in a deposit for long enough to make it worthwhile shopping around. 

Brendan 

Brendan


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## Páid (29 Nov 2022)

Brendan Burgess said:


> And I would not have any large amount of cash in a deposit for long enough to make it worthwhile shopping around.



Can you elaborate?

I've been looking at Raisin because there is some money I want to set aside for my son's college fund. I won't need this money for 10 years and Statesavings don't look at all attractive to me.


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## ClubMan (29 Nov 2022)

Páid said:


> Can you elaborate?
> 
> I've been looking at Raisin because there is some money I want to set aside for my son's college fund. I won't need this money for 10 years and Statesavings don't look at all attractive to me.


Covered many times in many threads.
If you want specific suggestions then do a Money Makeover post using the template in that forum.


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## noproblem (29 Nov 2022)

Brendan Burgess said:


> I would not have €100k in  a rainy day fund.
> 
> And I would not have any large amount of cash in a deposit for long enough to make it worthwhile shopping around.
> 
> ...


Maybe YOU wouldn't, but thousands of others might want to. Nothing wrong with almost €17,000.00 for 5 years if you didn't need it.
I bet you the paper billionaire Sean Quinn would agree with me right now.


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## ClubMan (29 Nov 2022)

noproblem said:


> Maybe YOU wouldn't, but thousands of others might want to. Nothing wrong with almost €17,000.00 for 5 years if you didn't need it.


The €17k will lose significant value due to inflation over the five years. Keeping large amounts of cash on deposit or in deposit style products is *generally* not a good idea or an optimal investment strategy. As I said, this has been covered many many times in many many other threads.


noproblem said:


> I bet you the paper billionaire Sean Quinn would agree with me right now.


Total non sequitur.


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## noproblem (29 Nov 2022)

ClubMan said:


> The €17k will lose significant value due to inflation over the five years. Keeping large amounts of cash on deposit or in deposit style products is *generally* not a good idea or an optimal investment strategy. As I said, this has been covered many many times in many many other threads.
> 
> Total non sequitur.


Don't want to get into a this and that scenario. We all know about inflation as of now, not a years time or whatever. Have you got a guaranteed better option? As for your Latin? Nonne mirabilis es?


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## ClubMan (29 Nov 2022)

noproblem said:


> Have you got a guaranteed better option?


Not guaranteed, no. But there are alternatives that will very likely provide better (than negative) returns over 5 years. The big issue here is that many people just assume/believe that cash savings/deposits are safe and no risk and that the nominal value of their money is the most important thing. This is flawed thinking that leads to suboptimal returns or, worse still, erosion of capital value. All investments involve some risk/reward. Cash deposits included.


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## jim (29 Nov 2022)

Brendan Burgess said:


> I would not have €100k in  a rainy day fund.
> 
> And I would not have any large amount of cash in a deposit for long enough to make it worthwhile shopping around.
> 
> ...


I never said anything about having 100k in a rainy day fund.

I said after paying down mortg, maxing pension, establishing rain day fund and only after all of that - if you still have some money sitting on deposit (100k, 1 k whatevs trev) and for which you have no better use then my point is throw it at the best deposit rate you can get.


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## Sarenco (29 Nov 2022)

ClubMan said:


> Not guaranteed, no. But there are alternatives that will very likely provide better (than negative) returns over 5 years.


As a matter of curiosity, how would you quantify “very likely”?

Would you say there is a 90% probability that a well diversified stock portfolio will outperform a cash deposit, after all fees and taxes, over any given 5-year period based on historic returns?  80% probability?  Something else?


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## Brendan Burgess (29 Nov 2022)

Páid said:


> I've been looking at Raisin because there is some money I want to set aside for my son's college fund. I won't need this money for 10 years and Statesavings don't look at all attractive to me.



Hi Páid

That is why these discussions "Raisin is paying x%" are liable to lead to bad outcomes.  You ask which bank is paying the highest deposit rate instead of the more fundamental question of "how should I fund my needs in 10 years' time?" 

The answer to that is to overpay your mortgage instead of putting it on deposit. And if you have paid off your mortgage, you probably don't need to worry too much about funding your child's education.  But if you are still worried long-term investments like that should be in equities or an equity-based product.

Brendan


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## NoRegretsCoyote (29 Nov 2022)

Brendan Burgess said:


> But if you are still worried long-term investments like that should be in equities or an equity-based product.


That depends totally on your level of risk aversion and to some extent your tax bracket.

"What's the best risk-free bank deposit for an Irish resident?" is a fair question.


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## jim (29 Nov 2022)

Brendan Burgess said:


> The answer to that is to overpay your mortgage instead of putting it on deposit


For many individuals, putting some of their net wealth into a deposit account may make sense. They may already have paid off their mortgage, maxed their pension, have a sufficient rain day fund etc etc. They may be happy to put it away for 1 or even 3 years. 

In this scenario the natural question for that individual is. Where is the best deposit accout? Raisin by a long way. The additional interest can be significant.


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## ClubMan (29 Nov 2022)

NoRegretsCoyote said:


> "What's the best risk-free bank deposit for an Irish resident?" is a fair question.


And a pertinent point is that no deposit product is risk free. And that's not even considering the opportunity cost/risk of not putting the capital to work better elsewhere.

This is why individual money makeover analyses are so much better than "what is the best X product?" questions.


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## NoRegretsCoyote (29 Nov 2022)

ClubMan said:


> And a pertinent point is that no deposit product is risk free.


<=€100k is indeed risk free per person per institution.



ClubMan said:


> This is why individual money makeover analyses are so much better than "what is the best X product?" questions.


I agree. But sometimes people know what product they want and want to know the best one.


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## Sarenco (29 Nov 2022)

NoRegretsCoyote said:


> <=€100k is indeed risk free per person per institution.


Well, there is always a possibility (albeit very remote) that a national deposit guarantee scheme will be insufficient to meet all claims where an institution fails.

AFAIK national guarantee schemes only maintain reserves equivalent to 0.8% of covered deposits.  

Perhaps it would be better to describe covered deposits as very low risk, as opposed to risk free.


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## noproblem (29 Nov 2022)

Sarenco said:


> Well, there is always a possibility (albeit very remote) that a national deposit guarantee scheme will be insufficient to meet all claims where an institution fails.
> 
> AFAIK national guarantee schemes only maintain reserves equivalent to 0.8% of covered deposits.
> 
> Perhaps it would be better to describe covered deposits as very low risk, as opposed to risk free.


€100,000​All savings products on Raisin.ie are protected up to an equivalent of €100,000 per depositor and bank according to EU laws.

€0​Since the introduction of the EU-wide harmonized regulation on deposit guarantee schemes, savers have not suffered any losses within the protection limit of €100,000.

7 days​By 2024, the time limit for repayment by deposit guarantee funds will be shortened to 7 working days. A number of Member States have already implemented this timeline.


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## NoRegretsCoyote (29 Nov 2022)

Sarenco said:


> Perhaps it would be better to describe covered deposits as very low risk, as opposed to risk free.


The bank recovery and resolution framework is very advanced in Europe since the bailouts of 2008-09 and there are large deposit guarantee schemes at national and EU level. Banks also have to keep greater levels of liabilities that can be bailed in before retail depositors <€100k would be touched.

The risk is not precisely zero of course but approximates to it.


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## Sarenco (29 Nov 2022)

All true, of course.

However, in the US FDIC insured deposits are backed by the full faith and credit of the US government.

Now that really is risk free!


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## ClubMan (29 Nov 2022)

€100k in five years time is worth less that €100k now.
So, not actually risk free.

Anyway, at this stage, if some people want to believe that deposits are risk free then knock yourselves out.


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## noproblem (29 Nov 2022)

ClubMan said:


> €100k in five years time is worth less that €100k now.
> So, not actually risk free.
> 
> Anyway, at this stage, if some people want to believe that deposits are risk free then knock yourselves out.


Better than anything you've come up with. 
I do notice that some people are getting a tad snobbish about where the simple people might want to deposit their money. So what if it doesn't match inflation, not much in the world, if anything, that's doing that now. No trouble with plenty of "advisers" coming on here telling the obvious,  leaving it on the best deposit rate at the moment won't match inflation, but not telling us where it should be put. Oh, I forgot, historically it does better in a grouping of equities, or funds, etc. Sure hasn't it always done better that way,  then show us the 5/10/20 year charts. Many of us might be simple ordinary people, some with nice pots, others with very sizeable pots and others still with enviable large cauldrons of booty. The best available places to put dosh at the moment have been highlighted, no need for those perceived enlightened financiers among us to belittle that fact, and tell people it's not the place to put their hard earned money.


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## Brendan Burgess (29 Nov 2022)

Hi noproblem

It is really important to appreciate that no investment is risk-free. Paying down a  mortgage is risk-free and tax-free. 

People often ask me to recommend a risk-free investment and I tell them that. 

If you are investing over 10 years,  cash is very likely to lose some of its real value.   An investment in shares might lose its real value or it might earn a real return.  The longer the term, the less risky an equity investment becomes. Whereas the longer the term, the more risky a cash deposit becomes.

Brendan


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## fistophobia (29 Nov 2022)

I dont worry about inflation hitting my cash balances.
I plan on adding a % each year while inflation is high, to preserve real value of my cash.
A bigger problem is "lifestyle inflation". Spending more, as you earn more.


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## jim (29 Nov 2022)

Inflation is a reality. All we can do is choose wisely to preserve and ideally grow our wealth.

Deposit accounts are an option for some people as part of a suite of things they may be doing. 

Like anything, seek the best rates of return available. Choose Raisin, choose life.


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## noproblem (29 Nov 2022)

Brendan Burgess said:


> Paying down a mortgage is risk-free and tax-free.


In the same way as anything else. Hopefully it's fully insured and doesn't go on fire or get blown up in a storm. So I suppose you could say, not fully risk free.


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## Brendan Burgess (29 Nov 2022)

You are mixing up two completely separate things. 

Paying down a mortgage is risk-free. 

By your logic, putting money on deposit is doubly risky as it will be hit by inflation and your house might burn down.

Brendan


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## NoRegretsCoyote (29 Nov 2022)

Sarenco said:


> However, in the US FDIC insured deposits are backed by the full faith and credit of the US government.


The EU now has a resolution fund with €60-odd billion in it on top of national DGSs. In a few years the EU resolution fund will be de facto able to fund resolutions via borrowing from the ESM with a capacity for another €70-odd billion. Several EU banks have been resolved in recent years with no loss of deposits and minimal disruption to the normal economy.

All the while EU banks are better capitalised than in a very long time and all banks have to have very elaborate plans in place to deal with declines in asset quality or liquidity shortages that could precipitate a crisis. Bank supervision is literally 10x more intrusive than pre-GFC. My own view is that some of the recent crypto madness was a result of regulation successfully making traditional financial products too safe for people with a high risk tolerance to have an interest in! 

Anyway personally I have zero fear of loss of nominal funds <=€100k in an EU bank account.


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## Sarenco (29 Nov 2022)

NoRegretsCoyote said:


> The EU now has a resolution fund with €60-odd billion in it on top of national DGSs.


It does indeed.

But the single resolution fund represents less than 1% of covered deposits.

Nowhere near as comprehensive as a FDIC (US Government) guarantee.


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