# NTMA Cuts State Savings Rates Again (8 December 2013)



## Lightning (8 Dec 2013)

[broken link removed]



> FIXED RATE PRODUCTS
> 
> 3-year Savings Bond (Issue 15)  offering a 4% fixed-rate total return (AER1 1.32%)
> 4-year National Solidarity Bond2 (Issue 4) offering an  6% fixed-rate total return (AER 1.47%)
> ...


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## theresa1 (8 Dec 2013)

http://www.rte.ie/news/2013/1208/491582-an-post-ntma/

- Have €3,000 in cash and should have gone to the post office last week to get a 10 year bond - only have myself to blame.


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## theresa1 (8 Dec 2013)

"Please Note: Some of the features of Issue 4 of the 
National Solidarity Bond are different to Issues 1, 2 and 
3. In particular, unlike those earlier issues, there are no 
annual payments of interest to the bond holder under 
Issue 4. A bonus payment is only paid to the holder upon 
maturity (or early encashment) of the bond."

CiaranT - Any view on this change to the 4 and 10 year bond?


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## Lightning (8 Dec 2013)

A few thoughts:

This round of cuts was first rumoured here on 18 October 2013 and reported subsequently in the Independent.
There is no change to the 3 year rate. KBC still offer the highest 3 year rate. However, there are new T&C's.
The 5 year term is gone. The term is now 5 years 6 months.
Despite the rate cuts, when using comparable grossed up rates, the NTMA still offer the highest 4 year and 5 year 6 month rates (when compared to 5 year rates).
The annual payment of interest, which was subject to DIRT, is gone with the 4 year and 10 year rate. This was probably to simplify the offering and make the product what now appears to be fully DIRT exempt.
Prize bonds have become even more unattractive.
Now even more difficult to justify having your money in such long NTMA terms and such low rates.


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## theresa1 (8 Dec 2013)

http://businessetc.thejournal.ie/an-post-savings-bonds-1212149-Dec2013/

The reductions aim to level the playing field with the banks’ savings products after the increase in DIRT tax.


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## The Ghoul (8 Dec 2013)

Just looking at the 10 year SB in more detail and comparing it to issue 3. Does An Post and the NTMA put brochures for older issues on their websites? I had a very quick look but couldn't find them. Obviously the terms and conditions will be stated in legislation and can probably be found on irishstatutebook.ie but still, it's handy to have a brochure.

I have saved some of the old brochures in any case.

10 year SB issue 3:

1% interest each year for 10 years. Gross, not reinvested, subject to DIRT.

Cumulative bonus after year 4 - 0%
Cumulative bonus after year 5 - 6%
Cumulative bonus after year 7 - 13%
Cumulative bonus after year 10 - 25%

Pre Budget the AER for the full term was 2.79%
Post Budget, assuming DIRT/PRSI of 41% on the interest only I calculate AER for the full term as 2.73%
Post Budget, assuming DIRT/PRSI of 45% on the interest only I calculate AER for the full term as 2.70%

10 year SB issue 4 -the new one introduced today - the structure seems more like savings certs and bonds:

No yearly interest.

Cumulative bonus after year 1 0.15% 
Cumulative bonus after year 2 0.50% 
Cumulative bonus after year 3 1.00% 
Cumulative bonus after year 4 3.00% 
Cumulative bonus after year 5 6.00% 
Cumulative bonus after year 6 8.00% 
Cumulative bonus after year 7 12.00% 
Cumulative bonus after year 8 18.00% 
Cumulative bonus after year 9 24.00% 
Cumulative bonus after year 10 30.00%

Assuming no DIRT or PRSI, AER for the full term is 2.66%

So, 2.73 or 2.70% for issue 3 post Budget vs 2.66% for the new issue, not a massive change.

And if you were to encash after, say year 4 the new issue seems better, 3% tax free bonus compared to 0% bonus and 4% interest minus DIRT/PRSI. I haven't looked closely at the other years.

Also there seem to be a change in the terms if you encash between anniversary dates although it is not phrased very clearly to me. From the state savings website:


> Repayments made before the first anniversary date will receive a bonus payment  based on Principal being repaid at the rate of 0.15% based on the number of days  on deposit (excluding date of repayment)
> 
> Repayments made between anniversary dates will received a bonus payment at the  rate of 0.15% based on the number of days on deposit on the total of the  repayment (Principal + Bonus) value at the last anniversary date. (excluding  date of repayment)


So if I encash 100 days after an anniversary date do I get a bonus of 100/365 *0.15% on the principal + bonus as well as the bonus itself accrued up to the anniversary date?


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