# saving approx 600 p/m for 2 yrs - options?



## marcellaf (27 Mar 2007)

hi all, 

This is my first post here although I've been lurking around this board for quite a while.

Brief synopsis of my financial situation:

Earning approx 2100 euro a month.  

Saving 600 a month at the moment, direct debit in to a credit union account which has poor return (2%).  Currently  have 12k in there earning nothing really.

I do not own a house, nor do I intend to buy in the current housing climate.  That is bar my dream house comes on the market for less than 250k, and in Galway that is just not going to happen.

I would like to continue saving but want to get a better return and also want to have access to some of the money at least without being penalised.  I may possibly have to change my car in the next year or so and would need approx 5 or 6k to do that.

I am 28 years old and do not have a pension.

Could anyone advise me what my best options are from this point?  I have a current account with AIB, so was considering signign up to their regular saver account and putting 300 euro a month in there.  Would this be a good move do you think?

all/any suggestions welcome, 

thanks.


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## oldtimer (27 Mar 2007)

You say you have an AIB account so it would be the best option to save their max of €300 per month (7.10%). If you have a spouse/partner another account could be opened bringing to your figure of €600 per month. If not you could open another one with Bank of Ireland for €300 per month (6.5%). Anglo Irish Bank and Halifax both offer 7% but their terms and conditions are more restrictive and probably would not suit you. Always be aware of the terms and conditions.


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## marcellaf (27 Mar 2007)

thanks for that.  Do I need to have a Bank of Ireland current account first, or can I transfer to BOI from my AIB current account?

thanks.


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## NHG (27 Mar 2007)

Also make sure that your current a/c is the new "High Interest A/C" at least while your funds (up to €1500) are sitting there during the month waiting to be transferred to various locations they will be also earning a bit of interest!

If you have anything over and above in a particular month after feeding your regular saver a/c's you could transfer it into the aib on-line savings a/c (just set up the monthly dd for min amount €20)

Put the €10k in your cr union into Rabo and the balance into NR.


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## Bob_tg (27 Mar 2007)

Marcellaf - the advice so far is good ... one question re your pension.  Does your employer have a scheme?

One other point as well, there is no point transferring between BOI and AIB if you're already in AIB.  Just set up a "regular savers" account with AIB for the first 300, and then put the other 300 in to one of the other accounts mentioned above (e.g. Northern Rock).

Bob


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## marcellaf (27 Mar 2007)

Thanks very much everyone, great to get some ideas to go on.

Bob, my employer does not have a pension scheme (only access to employee only contribution PRSA), but I was wondering if should still consider putting say, 100 a month in to a PRSA?  And then the remaining 500 in to savings?

I will go ahead with the AIB regular saver for 300 for sure.

As for the other 200 per month, not sure if I should go with Rabo or Northern Rock.  

If I was to move the money that is sitting in the credit union - or, 10k of it, should I move it all in one lump sum to Rabo/NR or what would be the best option?

thanks again.


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## marcellaf (27 Mar 2007)

ok, I went down to AIB this afternoon and am set up for the regular saver, first installment to be taken next week.

I will probably move 10k out of my credit union account in to Rabo direct.

After that, I plan on putting 200 each month probably in to Rabo also, and will continue to put 100 in the credit union in case I ever need a loan from there.

Does that sound like a reasonable plan?  What about pension?


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## NorfBank (27 Mar 2007)

Why 200 into Rabo every month?
Once you go over the 10k savings with them then your interest rate drops to 3.75%.
Better rates on offer out there (BOI, Anglo) for regular savings even if you want instant access. You will have instant access to the 10k with Rabo in any case.


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## marcellaf (27 Mar 2007)

ok, I had forgotten the lower interest rate once you go over 10k with Rabo.

With bank of Ireland, can I just open 1 account and transfer to that account each month from my AIB current account?  Or do I have to have a current account with BOI aswell as a saver account?

thanks.


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## oldtimer (27 Mar 2007)

If you want to open a BOI regular saver account as far as I know you must call into your branch personally with the relevant documentation etc., It is not necessary for you to open a BOI current account - you can feed it from your AIB current account. Give BOI the details of your AIB current account and they will set up the montly deductions mandate for you.


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## makko (28 Mar 2007)

What about investing in shares? Say, bluechip companies like banks and large multinationals..
Seeing as you have chosen to go down the Rabo route you could also invest in some of the funds that they offer..you can start with as little as €100.
You don't seem to be planning on spending your lump any time soon so stocks and funds might be worth looking at.


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## marcellaf (28 Mar 2007)

I did think about shares alright but figured since I was only talking about small money that it wouldn't be worth my while.  Plus, I know nothing about investing, and can't seem to get my head around it.  
If I was to invest, the most I would be prepared to 'risk' would be 2k.  Would the fees not outweigh any possible returns for this low amount?


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## Bob_tg (28 Mar 2007)

Marcellaf - on the pension thing, if your employer doesn't contribute then I'm not too sure - it's marginal in my opinion, at your age, and given that you don't own a house.  It might be better hanging on for another couple of years and investing your cash in a deposit for the house when you feel ready to get in to the property market.  Pensions or not, you might want to have some kind of idea about retirement planning (maybe join the civil service  ).

Bob


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## Sunny (28 Mar 2007)

Bob_tg said:


> Marcellaf - on the pension thing, if your employer doesn't contribute then I'm not too sure - it's marginal in my opinion, at your age, and given that you don't own a house. It might be better hanging on for another couple of years and investing your cash in a deposit for the house when you feel ready to get in to the property market. Pensions or not, you might want to have some kind of idea about retirement planning (maybe join the civil service  ).
> 
> Bob


 
I don't think it is marginal at all. At 28, you should have started saving for a pension and it is also the most tax efficient saving scheme there is. Even better than the SSIA! Not saying that you shouldn't continue saving for house etc but you should certainly put money into a pension. Check out the pensions board website to see how much you need to save to give yourself a decent pension. Gives you quiet a fright!


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## Bob_tg (28 Mar 2007)

Sunny - Not sure I agree with you.

It may be tax efficient, but at 28 years of age, over the next 25-30 years inflation will erode any such advantage.  

It might be a different story for a 35 or 40 year old, but my opinion is that anyone with surplus cash in their twenties without a house should think very carefully before handing over their hard-earned cash to a PRSA where the employer doesn't contribute.

Bob.


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## Bob_tg (28 Mar 2007)

PS - the Pensions Board website would want to put the frightners up people!!


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## Sunny (28 Mar 2007)

Bob_tg said:


> PS - the Pensions Board website would want to put the frightners up people!!


 
Why?


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## Bob_tg (28 Mar 2007)

The Pensions Board is a body sponsored by the Government.  It's in the Goverment's interest to get as many individuals as possible looking after their own pensions.  

General Government interests and best financial planning for individuals don't always go hand in hand.


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## beaky (28 Mar 2007)

Bob_tg said:


> It may be tax efficient, but at 28 years of age, over the next 25-30 years inflation will erode any such advantage.Bob.


Bob,
Does inflation not erode all returns.  I would have thought it does and therefore one may as well have the 'before tax' pension investment working for you over the next 25 years rather than a smaller after tax personal investment.


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## ClubMan (28 Mar 2007)

marcellaf said:


> I did think about shares alright but figured since I was only talking about small money that it wouldn't be worth my while.  Plus, I know nothing about investing, and can't seem to get my head around it.
> If I was to invest, the most I would be prepared to 'risk' would be 2k.  Would the fees not outweigh any possible returns for this low amount?


Not necessarily - investing indirectly in shares through a low charges unit linked fund while choosing a fund with a suitable risk/reward profile that matches your specific needs might be an option. Probably should be part of a well balanced portfolio for most people.


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## Sunny (28 Mar 2007)

beaky said:


> Bob,
> Does inflation not erode all returns. I would have thought it does and therefore one may as well have the 'before tax' pension investment working for you over the next 25 years rather than a smaller after tax personal investment.


 
I agree with you Beaky. Its crazy to put off starting a pension until you are 35 or 40 if you are in a position to start you one in your 20's. No-one is saying he should all of the 600 a month into a pension. Assuming he pays tax at the higher level, a pension contribution of €200 p.m. would cost him a pricely sum of around €118 and that doesn't include relief on PRSI etc. Still leaves him €480 odd to do what he likes.


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## ClubMan (28 Mar 2007)

A high rate taxpayer will get up to 41% tax, 4% _PRSI _and 2% health levy relief on pension contributions up to his/her age related tax relief limit. This means that each €1 contributed may only cost them a €0.53 reduction in net/disposable income. Obviously pension income is assessable for income tax at retirement but remember that the pension fund will grow tax free and you can take up to 25% of the pension fund as a tax free lump sum.


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## oldtimer (28 Mar 2007)

(1) The op says in original statement he wants access to at least some of the money. Any money put into a pension fund is not readily accessible.(2) I think the notion that pensions are ''better than SSIA'' is overstated. Remember when you get to retirement (like me) my AVC (ARF) is readily available to me - but is taxable - so some of the gains I made would be clawed back. With SSIA's one gets the 25% for keeps, no strings attached. (3) Re ''you can take up to 25% of the pension fund as a tax free lump sum'' for me the jury is still out on this one. I was eagerly looking forward to my tax free lump sum on retirement but because of my tax implications re my lump sum I was informed I was entitled to nothing tax free. Am still investigating and may have to seek the assistance of an accountant. I constantly see this statement and cringe - I think it should be worded '' you *may* be able to take up to 25% of the pension fund as a tax free lump sum.


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## ClubMan (28 Mar 2007)

oldtimer said:


> I was eagerly looking forward to my tax free lump sum on retirement but because of my tax implications re my lump sum I was informed I was entitled to nothing tax free.


What tax implications?


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## Bob_tg (28 Mar 2007)

My point really was that if you are 28 and don't own a house, once the market seems right, I would think it is generally more prudent to save to maximise the deposit on a house/land.  That would mean putting the cash in to lump sum and surplus in to as much high interest savers for the next few years until the time to buy is right.

On the other hand, if house-buying isn't a target in the next 5-10 years, then the debate widens to investment category.


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## marcellaf (28 Mar 2007)

Re pension, I do not pay any tax at the higher rate, so any tax savings would be at 20%.  Still not too bad I suppose, but there's more of an incentive to invest in a pension if you are on the higher rate of tax I feel.

The house buying debate, well, its a tricky one.  My partner and I could (in theory anyway) get a mortgage right now to buy a house near where we currently live.  I just feel at the moment that it is not the time to buy, the prices are way too high (min 350k) and we'd be paying 3 times in mortgage what we are paying in rent.  So after a year or two of me being frantic to buy a house (got caught up in the whole panic) I have finally calmed down and realised that trying to enjoy my life and having the money to do so is more important than working to pay my mortgage each month.  Maybe in a few years time I'll feel different or be in different circumstances. That's my take on it at the moment anyway, I could be completely wrong but!

Clubman, you quote 'investing indirectly in shares through a low charges unit linked fund while choosing a fund with a suitable risk/reward profile that matches your specific needs might be an option' - this indeed might be an option.  Is there any thing like a dummys guide to this type of investment?

thanks again everyone, much appreciated.


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## ClubMan (28 Mar 2007)

marcellaf said:


> Re pension, I do not pay any tax at the higher rate, so any tax savings would be at 20%.
> 
> 
> 
> ...


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## paddyd (28 Mar 2007)

ClubMan said:


> Not necessarily - investing indirectly in shares through a low charges unit linked fund while choosing a fund with a suitable risk/reward profile that matches your specific needs might be an option. Probably should be part of a well balanced portfolio for most people.


 
AIB provide a Versatile Investment Plan (VIP), into which you can put €200 - €1000 p.m.
If you join before this friday 30th, AIB will match your first months installment (up to €1000), as long as you maintain the same monthly rate for the first 5 years.
You have a choice of about 6-8 managed or passive funds, of differing risk levels.


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## ClubMan (28 Mar 2007)

What charges and other terms & conditions apply apply? Remember that the likes of _QL _are totally flexible, take regular contributions as low as €51 p.m and only charge an annual managment fee of 1% on some of their funds.


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## paddyd (29 Mar 2007)

The fee on the EuroZone and Irish funds is 1.4%. More actively managed funds are higher.


Monthly contribs are 200-1000.

The T&C are actually quite flexible. You can reduce monthly contrib's at any time, or take up to 6 months holiday, at no charge; as long as the fund balance is over 2,400.

If you reduce you monthly contrib in the first 5 years, AIB will take back the same % of the bonus; i.e. if you contrib 1000 p.m, and reduce it 600, they will take back 400 of the 1000 they gave as bonus.
You can also withdraw funds, as long as the balance is kept over 2.4k also.
there are loyalty units purchased (2-3%) on 7, 14, 21 years.

heres the link to the funds availab, but as I said above, the offer finishes tomorrow CoB:

[broken link removed]


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## marcellaf (11 Apr 2007)

Thanks to everyone for all their help, much appreciated.

Apologies in advance for how stupid this next question may seem, but I just don't want to get it wrong!  

How do you open a Rabo direct 5% interest account?  Or more to the point, I want to move 10k from my credit union account in to a new rabo account.  Do I ask the credit union to make the cheque out to me personally, or to Rabo?  Can I then post the cheque to Rabobank, along with my application form and whatever ID is required?

I just don't want to start the ball rolling until I know exactly, step by step, what I need to do.

Thanks a mill.


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## LDFerguson (11 Apr 2007)

> Apologies in advance for how stupid this next question may seem, but I just don't want to get it wrong!
> 
> How do you open a Rabo direct 5% interest account? Or more to the point, I want to move 10k from my credit union account in to a new rabo account. Do I ask the credit union to make the cheque out to me personally, or to Rabo? Can I then post the cheque to Rabobank, along with my application form and whatever ID is required?


 
Definitely not a stupid question.  Everyone has to learn the first time.

You go through the Rabo website application process and get the Rabo account opened up before you put any money into it.  You'll then have an account number and sort code like for any other bank account.  

Your Credit Union may or may not have credit transfer facilities.  If it does, you can simply instruct them to lodge the money directly into your Rabo account.  

If it doesn't you can get a draft made payable to yourself.  As Rabo don't have branches, you can either post the draft to Rabo and they'll lodge it manually or else lodge it to another current account and transfer the money to your Rabo account using internet banking.


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## marcellaf (11 Apr 2007)

Thanks a million Liam, I will go ahead and open the Rabo account as soon as possible.

Very clear reply, thanks!


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## sherib (12 Apr 2007)

Marcellaf - good luck with Rabo. I was quite apprehensive about opening an account with them because of what I'd read about the security gadget (Digipass). I went ahead recently and was very surprised to find how easy it is to use. They automatically open a current account as well as a savings one though I don't know why. The only minor gripe I have is that the cheque I posted on 2nd April (a refund from Revenue made out to myself) has still not been credited to my account. Maybe it's because so many are opening accounts since their rate is the best available so far.


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## elefantfresh (12 Apr 2007)

Am i right in saying that once 65 you will get the full state pension by default and then you top that up with whatever pension scheme you had? or does the state pension become "means" tested according to your pension? for example : if i had a private pension of say 300e per week, am i still entitled to a full state pension? man, this is a confusing topic.


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