# Where should low earners put their deposits now?



## Sandpiper (16 Oct 2013)

Brendan Burgess said:


> Where should 20% or 0% tax payers put their savings so that it will be subject to income tax at the lower rate rather than DIRT at 41%?
> 
> Maybe a Credit Union account if the rate is ok?
> 
> Brendan



I'd really like to know the answer to this one - someone on another thread here mentioned prize bonds?  Is this a realistic option?  I really don't want to fritter away the comparitively little we've saved for an ever-increasingly uncertain future, but I'm aghast at 41%!  

I really can't understand why savings income isn't taxed at the same rate as our other income (20%).  It probably makes little odds to higher earners/tax payers but it seems as if the lower paid are being doubly penalised here   To save at all on a low income is hard enough without this.


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## orka (16 Oct 2013)

Anyone with savings and an outstanding mortgage on a variable rate (probably not much point for a low tracker) could look to see if their bank does an offset mortgage.  We have one with Danske which means savings (and current account balance) effectively earn a 4.5% rate net of tax.


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## Marc (24 Nov 2013)

The conclusion I reach for some people in this position is that their "growth investments" will now have to do all the heavy lifting as their deposits will have a negative expected return after DIRT and inflation are taken into account.

For those unwilling to hold growth assets, the phrase "financial repression" has been used to describe their position. Since their "choice" is really between either having to invest with the possibilility of a negative return or to simply accept the inevitability of a slow and creeping loss of personal wealth and associated purchasing power on an after tax basis due to inflation. 

Clearly, therefore both courses carry some risk.

The key to this problem as I see it is to determine a "Goldilocks portfolio". How little risk do I *need* to take in order to create a stream of income which is subject to income tax (plus USC and possibly PRSI) and capital gains tax rather than DIRT or Exit Tax and offer the prospect of maintaining the real value of my capital, within the constraints of my willingness and capacity for investment risk.

The alternative for many people is simply that not investing at least some of their capital should now be considered to be "recklessly conservative".


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## Marc (8 Dec 2013)

My latest research on this subject has been covered today in the Sunday Times 8th December 2013.

The piece can be read on my Blog 

[broken link removed]

Or if you have a subscription on the Sunday Times online here 

[broken link removed]


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