# Prize Bond vs 5 Year Fixed State bond



## masterboy123 (31 Oct 2022)

Hi All, 

I want to invest around €10k and wondering which would fetch me a better return? 

Prize Fund rate currently 0.35%. 
5 year bond = 3% Total Return.
Any advice/opinion please.


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## ClubMan (31 Oct 2022)

masterboy123 said:


> Hi All,
> 
> I want to invest around €10k and wondering which would fetch me a better return?
> 
> ...


Of the two, the latter is obviously the better guaranteed return because you could (and very likely will) win nothing on Prize Bonds.
But over 5 years there's a strong argument for investing directly or indirectly in equities for the possibility of an even better return.


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## joe sod (1 Nov 2022)

With inflation running at 10% a year you are losing alot of money with both the prize bonds and the 5year bond. Even if you opened a sterling savings account you could be getting 3% a year now with rising interest rates. I particularly would not be locking my money away in a very low interest rate bond now for 5 years for just 3% !! 
Even though stocks don't do so well during high inflation they do a much better job of tracking inflation than historically low yield bonds.


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## jpd (1 Nov 2022)

3% total return equates to 0.59% annually, so definitely higher than Prize Bonds expected return 

If you redeem the 5 year bond early, you will not get the full interest earned to date as early redemption reduces the interest earned - by quite a lot actually. So you are effectively locking your money away for 5 years


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## jpd (1 Nov 2022)

Don't think I would be adding exchange rate risk by investing in £s right now


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## joe sod (1 Nov 2022)

jpd said:


> Don't think I would be adding exchange rate risk by investing in £s right now


Ok but it's more to highlight what poor investments these bonds are now with high inflation. Even waiting a year when deposit interest rates and bonds are likely to be much higher interest rates.  The ultra low interest rate are still a legacy issue that have not fully washed out of the financial system yet


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## masterboy123 (1 Nov 2022)

joe sod said:


> With inflation running at 10% a year you are losing alot of money with both the prize bonds and the 5year bond. Even if you opened a sterling savings account you could be getting 3% a year now with rising interest rates. I particularly would not be locking my money away in a very low interest rate bond now for 5 years for just 3% !!
> Even though stocks don't do so well during high inflation they do a much better job of tracking inflation than historically low yield bonds.


Thanks for your advice. 
I am with AIB and they don't have any saving account with 3% interest rate. 

How do you get access to the Sterling Savings account? 
And any such product available in Ireland?


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## Peanuts20 (1 Nov 2022)

Prizebonds are raffle tickets with the guarantee you will get your money back but nothing else. Nice to have a few as a gift but not an investment product for sticking thousands into.


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## jpd (1 Nov 2022)

The reason sterling offers such a high interest rate, is because the markets expect sterling to depreciate against the USD and the EUR and require a high rate to compensate the expected exchange rate loss

Whether the expected exchange rate loss will come to pass is unknowable in advance, but ...


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## Groucho (1 Nov 2022)

Better advice for you here than on Boards.ie, methinks!


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## RonnieShinbal88 (1 Nov 2022)

I've used some of the crowdfunding sites, linkedfinance, mintos etc.

With LF you can get 7% p.a. lending to an A+ rated company for 3 years, 11% for a B rated company for 5 years etc.
They do the ratings themselves, no idea how reliable they are.
I set up autobids and kept each individual loan amount small, to limit exposure to any single company, e.g. with 10k lend 100 euro to 100 companies, one company defaulting will cost you max 1% of yield (probably much less as they seem quite good at recovering amounts and the defaults don't happen immediately).
The down side with the highly diversified portfolio approach is that it takes months to get all your money invested, so you fade in and out rather than having 100% invested for 5 years. You could look at 200 a pop to 50 companies and probably still well beat the bond yields you are listing even with a few defaults.

There may be other or better options out there, the Mintos one has been running for years but the loan originators themselves on there can be dodgy/risky and it's more of a marketplace for loans, so if you are not an expert, there are others in there who are, so you are probably often buying stuff they don't want. The advantage is you can sell your loans at any time in that market and get out (assuming someone wants to buy them). I decided around Covid that it was too risky for me but I see it is still up and running and there is a longer history available for the originators now. It was easy to liquidate when I got out after Covid started and I got a decent return overall. I'd do a lot of research before getting into those loan markets again, it wouldn't be worth the effort unless you are investing a lot.


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## RonnieShinbal88 (2 Nov 2022)

RonnieShinbal88 said:


> I've used some of the crowdfunding sites, linkedfinance, mintos etc.
> 
> With LF you can get 7% p.a. lending to an A+ rated company for 3 years, 11% for a B rated company for 5 years etc.
> They do the ratings themselves, no idea how reliable they are.
> ...


Obviously lending to small companies (like pubs, restaurants, tanning salons etc.) is riskier if we hit a bad recession so that's something to consider, once you lend the money out it's gone and you have to wait for it to come back in monthly loan repayments!


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## ClubMan (2 Nov 2022)

Somebody who's asking about prize bonds versus state savings is almost certainly not a suitable candidate for the extreme risk/reward of microfinancing!


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## masterboy123 (2 Nov 2022)

Thanks all. 
I am gonna hold off from any investment now. 

I do have a relatively large portfolio of different stocks using a "Pie" on Trader 212. 

My crypto investment is 35% in loss at present.


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## masterboy123 (2 Nov 2022)

ClubMan said:


> Somebody who's asking about prize bonds versus state savings is almost certainly not a suitable candidate for the extreme risk/reward of microfinancing!


Perhaps this assumption may not be true


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## ClubMan (2 Nov 2022)

masterboy123 said:


> Perhaps this assumption may not be true


Well, in the absence of more info about their overall financial situation and only the original question to go on, it's a reasonable assumption.
And if the original poster cannot answer the question posed then they are obviously not very financially astute.


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## noproblem (2 Nov 2022)

No need for people to demean others for their supposedly lack of financial investment expertise. I've invested in funds, post office savings, deposit accounts and a few stocks I bought through a bank. But, my overall knowledge is zilch apart from my hunches.


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## RonnieShinbal88 (2 Nov 2022)

ClubMan said:


> Somebody who's asking about prize bonds versus state savings is almost certainly not a suitable candidate for the extreme risk/reward of microfinancing!


You recommended investing in equities!


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## jpd (2 Nov 2022)

Investing a few € 000s in the like of Ryanair, Shell, BNP or any other large cap European company is a lot less risky than investing in small, unquoted companies via crowd funding or the like


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## ClubMan (2 Nov 2022)

RonnieShinbal88 said:


> You recommended investing in equities!


I didn't *recommend* it.
It's impossible to recommend anything given the small snippet of info in the original post.
A money makeover post would be needed.

Equities are a lot less risky than microfinancing especially over the medium/long term.
And arguably less risky than deposits where the money is guaranteed to lose value due to inflation.


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## RonnieShinbal88 (2 Nov 2022)

jpd said:


> Investing a few € 000s in the like of Ryanair, Shell, BNP or any other large cap European company is a lot less risky than investing in small, unquoted companies via crowd funding or the like


I don't agree, if you lend to 100 small companies versus buying shares in e.g. 3 risky large companies, diversification reduces the risks considerably.
With crowd funding you can spread your capital over literally hundreds of small companies, if any one of them goes bust you only lose a fraction of a percent. You do have to consider the reliability of the loan issuers themselves. The share prices you listed could lose 20% over a weekend and no-one would be that surprised.


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## joe sod (2 Nov 2022)

Yea but you are looking at the repayment potential of small companies in a normal period like over the last decade or so. How would your strategy of lending to small businesses have coped with the 2008 financial crash when many went to the wall?


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## RonnieShinbal88 (2 Nov 2022)

The S&P 500 almost halved at the time so you are looking at half of the companies having to go bust as soon as you hand them money to be comparable with equities in crash risk terms. You had 13 years from '00 to '13 for the S&P 500 to recover it's high in '00, granted it paid a small dividend of 0.5-2%.

But it is certainly a risky strategy and not very liquid, I got out of it bit by bit myself, just mentioned it as an alternative. 
Mid term Government bonds and savings accounts are fairly unappealing for most these days with inflation so high and bond prices are exposed to further rate hikes.


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## Freelance (3 Nov 2022)

masterboy123 said:


> Hi All,
> 
> I want to invest around €10k and wondering which would fetch me a better return?
> 
> ...


The 3% over 5 years is an historic low. And given the trend in interest rates it has a reasonable chance of increasing in the future. Note that the “sleep on the job jobsworths” that run state savings are usually the absolute last in the market to react to interest rate changes, up or down. 

Returning to your very specific question and ignoring all the unasked for advice above, I would suggest that you shove it in PB for now, and whip it out and put it in the 5 year bonds “when and if” the initial 90 days has elapsed *and* the bond rate increases next year, or you find a better use for it. 

One observation. When comparing the two products, bear in mind that while the notional PB rate is .35%, this includes the large prizes which you have close to zero chance of winning. The realistic return, based on the €50 prizes, is closer to .25%. There is a prize calculator in another thread if you want to look that up. With €10k, you will probably win €50 over 5 years, possibly €0 or €100.


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## joe sod (3 Nov 2022)

masterboy123 said:


> My crypto investment is 35% in loss at present


I think I would be concentrating on that to be honest.  Crypto  was really a feature of the ultra low interest rate environment we had for the last decade,  with no sign of interest rates stopping especially after what the Fed said yesterday I cannot see this recovering in the high interest rate environment we have now entered. 35% loss is actually not that bad for such an investment


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## Laughahalla (3 Nov 2022)

Microfinancing isn't that safe - A lot of the companies that need microfinancing are not credit worthy , They would probably use a traditional lending facility if they were.









						The Percentage of Businesses That Fail | LendingTree
					

Nearly 1 in 5 U.S. businesses fail within the first year, according to the latest data from the U.S. Bureau of Labor Statistics.



					www.lendingtree.com
				




If you have any consumer debt pay that down - Credit card will give you about 17% return. Paying off overdraft will give you about 15% return. Personal loan will give to between 6 & 12% return.
I'd probably keep 10k as a rainy day fund or somewhere I could get access to it easily enough in case of emergency/need to replace appliances/car. Think of it like insurance, You pay for this insurance. ( your 10k deflating is the price of this insurance). 

You are limited in where you can put it with low risk. I'd stay away from the microfinancing or loaning out your money to people that are not credit worthy.(Like Mintos) 

If you don't need the money for a long long time I'd be tempted to put it into your pension. Tax free growth and lowers your income tax on the way in.


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## masterboy123 (3 Nov 2022)

joe sod said:


> I think I would be concentrating on that to be honest.  Crypto  was really a feature of the ultra low interest rate environment we had for the last decade,  with no sign of interest rates stopping especially after what the Fed said yesterday I cannot see this recovering in the high interest rate environment we have now entered. 35% loss is actually not that bad for such an investment


I have a feeling that crypto will spike again and I don't have any regrets holding a tiny proportion of my wealth in crypto. 
I recall being +55% in profit at one stage. I will continue to hodl!


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## masterboy123 (3 Nov 2022)

Laughahalla said:


> Microfinancing isn't that safe - A lot of the companies that need microfinancing are not credit worthy , They would probably use a traditional lending facility if they were.
> 
> 
> 
> ...


Thanks for your opinion. 

I have over 10x of this amount saved as my "rainy day fund". Whatever I plan on investing, I consider it as "gone".


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## Laughahalla (3 Nov 2022)

masterboy123 said:


> Thanks for your opinion.
> 
> I have over 10x of this amount saved as my "rainy day fund". Whatever I plan on investing, I consider it as "gone".


You should do a money makeover. Having over 100k in a rainy day fund for most is overkill.


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## masterboy123 (3 Nov 2022)

Laughahalla said:


> You should do a money makeover. Having over 100k in a rainy day fund for most is overkill.


Could you please guide me what is "money makeover."? 
Thanks


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## Laughahalla (3 Nov 2022)

masterboy123 said:


> Could you please guide me what is "money makeover."?
> Thanks








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## masterboy123 (3 Nov 2022)

Please review my Money Makeover post:






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## galway_blow_in (6 Dec 2022)

Word of warning to anyone considering putting money in a post office five or ten year bond, they do everything to block you from withdrawing early


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## masterboy123 (6 Dec 2022)

galway_blow_in said:


> Word of warning to anyone considering putting money in a post office five or ten year bond, they do everything to block you from withdrawing early


Did you have a bad experience with them recently?


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## ClubMan (6 Dec 2022)

galway_blow_in said:


> Word of warning to anyone considering putting money in a post office five or ten year bond, they do everything to block you from withdrawing early


It's not An Post who operate these products, it's State Savings - a division of NTMA.


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## galway_blow_in (6 Dec 2022)

masterboy123 said:


> Did you have a bad experience with them recently?


Absolutely dreadful experience, I put 60 k in spring of 2021 in the ten year bond , realised I could get over four times as much on UK government ten year a few months back so bought the on sale UK debt and applied to withdraw the money in the post office 

Still haven’t gotten it back, they write to me every few weeks saying I failed to quote my account number ( not true) , received a letter last Thursday saying they were posting the cheque if I didn’t provide electronic banking details ( I had ) within five days so I thought that’s fine , il wait for the cheque, low and behold another letter arrives yesterday with a case number saying I failed to provide my solidarity bond account number ( completely contradicting the previous correspondence) 

The NTMA don’t want people withdrawing money


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## noproblem (6 Dec 2022)

galway_blow_in said:


> Absolutely dreadful experience, I put 60 k in spring of 2021 in the ten year bond , realised I could get over four times as much on UK government ten year a few months back so bought the on sale UK debt and applied to withdraw the money in the post office
> 
> Still haven’t gotten it back, they write to me every few weeks saying I failed to quote my account number ( not true) , received a letter last Thursday saying they were posting the cheque if I didn’t provide electronic banking details ( I had ) within five days so I thought that’s fine , il wait for the cheque, low and behold another letter arrives yesterday with a case number saying I failed to provide my solidarity bond account number ( completely contradicting the previous correspondence)
> 
> The NTMA don’t want people withdrawing money


I take it the UK bond is dead in the water then so?


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## ClubMan (6 Dec 2022)

galway_blow_in said:


> Absolutely dreadful experience, I put 60 k in spring of 2021 in the ten year bond , realised I could get over four times as much on UK government ten year a few months back so bought the on sale UK debt and applied to withdraw the money in the post office
> 
> Still haven’t gotten it back, they write to me every few weeks saying I failed to quote my account number ( not true) , received a letter last Thursday saying they were posting the cheque if I didn’t provide electronic banking details ( I had ) within five days so I thought that’s fine , il wait for the cheque, low and behold another letter arrives yesterday with a case number saying I failed to provide my solidarity bond account number ( completely contradicting the previous correspondence)
> 
> The NTMA don’t want people withdrawing money








						Ireland State Savings - Help & Support | State Savings
					

Browse and search our help articles, download an application for or a brochure




					www.statesavings.ie


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## galway_blow_in (6 Dec 2022)

ClubMan said:


> It's not An Post who operate these products, it's State Savings - a division of NTMA.


Look , I wrote a cheque in the local post office and they took all the documentation off me , the product ( solidarity bond ) is advertised through the post office


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## galway_blow_in (6 Dec 2022)

noproblem said:


> I take it the UK bond is dead in the water then so?


How do you figure?


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## ClubMan (6 Dec 2022)

You should be able to encash using the State Savings online account.


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## galway_blow_in (6 Dec 2022)

ClubMan said:


> Ireland State Savings - Help & Support | State Savings
> 
> 
> Browse and search our help articles, download an application for or a brochure
> ...


That link doesn’t open upon selecting “ complaints “ which is apt


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## joe sod (6 Dec 2022)

galway_blow_in said:


> Absolutely dreadful experience, I put 60 k in spring of 2021 in the ten year bond


I'm surprised you put that much away in this, that was almost the lowest low of the interest rate cycle. Are there any penalties for withdrawal of money early . 
I wonder is there a way of buying into bonds maybe a year or two before maturity ?


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## galway_blow_in (6 Dec 2022)

joe sod said:


> I'm surprised you put that much away in this, that was almost the lowest low of the interest rate cycle. Are there any penalties for withdrawal of money early .
> I wonder is there a way of buying into bonds maybe a year or two before maturity ?


I put it there as an emergency fund , there was no talk of increasing rates in spring 2021 , anyway there is no penalty for early withdrawal, tax free rate is sub 1% , yield on UK Gilts were nearly 4.3% when I bought, I see the UK as every bit as safe as Ireland in terms of default risk regardless of how crazy things were for a month or so in London


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## joe sod (6 Dec 2022)

galway_blow_in said:


> put it there as an emergency fund , there was no talk of increasing rates in spring 2021


Well there was alot of talk about inflation as the covid lockdowns ended then, nothing in the Irish media albeit but internationally yes especially in the US as they were already experiencing inflation.  Even as far back as 2020 when the Evergreen tanker blocked the suez canal the seeds of the inflation had been planted as shipping costs exploded.
That's good that you are getting your money out of this with no penalty except the inflation penalty affecting all deposits


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## galway_blow_in (6 Dec 2022)

joe sod said:


> Well there was alot of talk about inflation as the covid lockdowns ended then, nothing in the Irish media albeit but internationally yes especially in the US as they were already experiencing inflation.  Even as far back as 2020 when the Evergreen tanker blocked the suez canal the seeds of the inflation had been planted as shipping costs exploded.
> That's good that you are getting your money out of this with no penalty except the inflation penalty affecting all deposits


It served a purpose at the time, anyway the NTMA are a shambles to deal with


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## ClubMan (6 Dec 2022)

galway_blow_in said:


> That link doesn’t open upon selecting “ complaints “ which is apt


The link and the second link to the complaints process work fine for me


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## galway_blow_in (6 Dec 2022)

ClubMan said:


> The link and the second link to the complaints process work fine for me


I believe you


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## ClubMan (6 Dec 2022)

galway_blow_in said:


> I believe you


No need to take my word for it.
Just click on the links properly.
If they still don't work for you then it's a problem at your end.


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## galway_blow_in (6 Dec 2022)

ClubMan said:


> No need to take my word for it.
> Just click on the links properly.
> If they still don't work for you then it's a problem at your end.


No need to be so testy , you’ve come on high handed now in several posts ?


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## TOMTOM123 (6 Dec 2022)

masterboy123 said:


> Hi All,
> 
> I want to invest around €10k and wondering which would fetch me a better return?
> 
> ...


i deal with  linked  finance  rates good  7 to 11 pc app........default  very low  173  loans  default 5.......i would i


RonnieShinbal88 said:


> Obviously lending to small companies (like pubs, restaurants, tanning salons etc.) is riskier if we hit a bad recession so that's something to consider, once you lend the money out it's gone and you have to wait for it to come back in monthly loan repayments!


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## galway_blow_in (12 Dec 2022)

Just a quick follow up,received my refund a few days ago but not a cent in interest despite owning the bond for eighteen months, I rang state savings ( NTMA) and was told “ no interest for first three years “

The product is advertised as paying 1% per annum ( tax free ) so it’s slightly misleading i would argue


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## ClubMan (12 Dec 2022)

galway_blow_in said:


> The product is advertised as paying 1% per annum ( tax free ) so it’s slightly misleading i would argue


Where is it advertised like that? As opposed to saying that the AER is c. 1%?





						Ireland State Savings - 10 Year National Solidarity Bond | Products | State Savings
					

Our 10 year National Solidarity Bond is a secure and straight forward way to save, offering the highest return of our products.




					www.statesavings.ie


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## galway_blow_in (12 Dec 2022)

ClubMan said:


> Where is it advertised like that? As opposed to saying that the AER is c. 1%?
> 
> 
> 
> ...


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## galway_blow_in (12 Dec 2022)

AER = interest earned in a year as stated at bottom of above link


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## ClubMan (12 Dec 2022)

That's not a State Savings advertisement.
AER on a fixed term product such as this is what you earn at the end of the full term.
It's clearly stated in the product information (which you agree to have read when signing the application form) that there is no return if the bond is cashed in before the 4th year.


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## Groucho (12 Dec 2022)

galway_blow_in said:


> the NTMA are a shambles to deal with



Rubbish.  They're top notch.


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## _OkGo_ (12 Dec 2022)

galway_blow_in said:


> The product is advertised as paying 1% per annum ( tax free ) so it’s slightly misleading i would argue


Hardly misleading, they literally have a table of interest credited in each year on the website and brochures. You've confused per annum and AER



galway_blow_in said:


> AER = interest earned in a year as stated at bottom of above link


This bit is a little misleading but much like the state savings, you didn't bother to click the link and read that sentence in full context of the paragraph it was written.

AER is used to standardize comparison of different products. It can't tell you when interest is paid or the penalties but it is accurate over the full term.


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## galway_blow_in (12 Dec 2022)

_OkGo_ said:


> Hardly misleading, they literally have a table of interest credited in each year on the website and brochures. You've confused per annum and AER
> 
> 
> This bit is a little misleading but much like the state savings, you didn't bother to click the link and read that sentence in full context of the paragraph it was written.
> ...


I’ve read the terms and conditions and I’m not entitled to interest and even after three years, would only be entitled to .25% but the product is somewhat misleading


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## jpd (12 Dec 2022)

How is it misleading?


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## _OkGo_ (12 Dec 2022)

galway_blow_in said:


> I’ve read the terms and conditions





galway_blow_in said:


> but not a cent in interest despite owning the bond for eighteen months, I rang state savings ( NTMA) and was told “ no interest for first three years"


You clearly didn't or you wouldn't have been expecting interest

What exactly do you think is misleading? The attached brochure specifically lists out the AER for each year of the product. 



			https://www.statesavings.ie/media/pdf/ss-brochure-4_10yr.pdf


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## ClubMan (12 Dec 2022)

galway_blow_in said:


> but the product is somewhat misleading


Sorry, it's not if you've read the terms and conditions - and understood them.


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## galway_blow_in (12 Dec 2022)

ClubMan said:


> Sorry, it's not if you've read the terms and conditions - and understood them.


Most headline adds don’t include an opportunity to scan the terms and conditions


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## ClubMan (12 Dec 2022)

galway_blow_in said:


> Most headline adds don’t include an opportunity to scan the terms and conditions


You still haven't cited any allegedly misleading ads for this product.


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## Ryan (23 Dec 2022)

I have €50,000 in KBC that I need to put somewhere. Would the majority in a 4 year bind with some more between prose binds and a deposit account be a good choice?
Have recently had an investment mature at a 15% loan so reluctant to go that road hsving been burned


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## ClubMan (23 Dec 2022)

Ryan said:


> I have €50,000 in KBC that I need to put somewhere. Would the majority in a 4 year bind


What 4 year bond?


Ryan said:


> with some more between prose binds and a deposit account be a good choice?


The return on these is likely to be marginal at best and almost certainly negative in real terms after inflation is accounted for. What is the money for and when will you need it?


Ryan said:


> Have recently had an investment mature at a 15% loan so reluctant to go that road hsving been burned


I don't understand what this means.

A better option might be to do a Money Makeover post so that people can comment on the basis of a more detailed picture if your overall financial and personal situation.


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## Duke of Marmalade (24 Dec 2022)

galway_blow_in said:


> I see the UK as every bit as safe as Ireland in terms of default risk regardless of how crazy things were for a month or so in London


It is not possible for the U.K. to default on sterling debt.  They simply print more sterling. That is the risk, it’s called inflation, which in turn leads to devaluation.


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## Ryan (24 Dec 2022)

ClubMan said:


> What 4 year bond?
> 
> The return on these is likely to be marginal at best and almost certainly negative in real terms after inflation is accounted for. What is the money for and when will you need it?
> 
> ...


Looking at the 4 year National Solidarity Bond or perhaps 3 year certs .
I don’t need the bulk of it immediately. Pending things going good at work it’s a house deposit one day I guess.

on the last point I got burnt in an investment so I am reluctant to take a risk again after this


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## Duke of Marmalade (24 Dec 2022)

Ryan said:


> Looking at the 4 year National Solidarity Bond or perhaps 3 year certs .
> I don’t need the bulk of it immediately. Pending things going good at work it’s a house deposit one day I guess.
> 
> on the last point I got burnt in an investment so I am reluctant to take a risk again after this


The rates on State savings are almost certain to go up next year; they are already out of kilter with bond rates.  Whilst it is possible to cash in State savings without penalty and re-invest; according to one poster this is a big hassle.  Maybe parking the money in Prize Bonds until the new rates are announced is best.


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## ClubMan (24 Dec 2022)

Ryan said:


> on the last point I got burnt in an investment so I am reluctant to take a risk again after this


This sounds similar to the flawed logic that many people who lost money on eircom shares use to conclude that they should not invest in shares.


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## jpd (25 Dec 2022)

If you think interest rates are rising and will continue to do so, then it is not the time to invest in a 4 year fixed interest certificate as you believe that higher interest rates will be available shortly


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