# A question on Savings certificates



## ExIRL (26 Feb 2010)

GeneralZod supplied the following in his Best Buys - Highest Term... post

*<
An Post: Savings Certificates 17th issue*
3 Years 3.23% (equivalent to *4.30%* because this product is not subject to DIRT at 25%) ** Best 3 year rate **
5.5 Years 3.53% (equivalent to *4.70%* because this product is not subject to DIRT at 25%) ** Best 5.5 year rate **
Note 1: €120,000 maximum
Note 2: Interest is not accrued on a daily basis, it is accrued each six months from the date of purchase. You can withdraw at any time during the term but you will loose any non accrued interest.
/>

My question is this:- Since interest is accrued every 6 months, why would anyone select the 3 year certificate over the 5.5 year cert? Is there something (penalty?) preventing cashing out from either product on these 6 month interval windows? 
For example, cashing out after 12 months would yield 35.30 on every 1000 invested in the 5.5 cert but only 32.30 on the 3 year cert. Am I missing something here?
Thanks.


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## oldtimer (27 Feb 2010)

The wording in the 'Best Buys' may be contributing to your confusion. In fact, there are two different products. Saving Bonds are for the 3 year term and Saving Certificates are for the 5.5 year term. Their terms and conditions are slightly different. The main points to remember are, if a depositor intends leaving the money for 3 years Saving Bonds are the better product. If a depositor intends leaving the money for the longer term of 5.5 years Saving Certificates are the better product. Another difference is when interest is added. With Saving Certificates interest is added every *6* months on the anniversary of the date they were purchased. With Saving Bonds interest is added every *12* months on the anniversary of the date they were purchased. I hope this answers your question  and clarifies any confusion.


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## Lightning (27 Feb 2010)

Thanks for the clarification Oldtimer. 

I have amended the best buys ...



> *An Post: Savings Bonds*
> 3 Years 3.23% (equivalent to *4.30%* because this product is not subject to DIRT at 25%) ** Best 3 year rate **
> Note 1: €120,000 maximum
> Note 2: Interest is not accrued on a daily basis, it is accrued each year from date of purchase. You can withdraw at any time during the term but you will loose any non accrued interest.
> ...


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## ExIRL (2 Mar 2010)

Thanks for the reply. Would it be correct to say then that the only real difference between the 2 is in the flexibility of exiting one's position with full interest?

On another point: What happens, after the 3 or 5 year term if the investor does nothing. Do the funds roll into the same product again at whatever the new interest rate is?
If you don't know off-hand don't worry. I think it's time to give the NTMA a buzz to clarify things anyway.


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## ronny78 (2 Mar 2010)

Apologies - just figured out the answer to my question. Need to stop reviewing savings options at this hour of the night.

R-


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## oldtimer (2 Mar 2010)

ExIrl, as I said above the main difference between saving bonds and saving certificates is bonds are better over 3 years - certs are better over 5.5 years. For example, after 3 years €1,000 in bonds earns €100,  €1,000 in certs earns €80. After 3 years bonds stop earning interest while certs continue making interest on a rolling scale. Regarding your second question, at the moment rolling over in bonds or certs on maturity is not an option. At maturity the purchaser is written to and given the option of cashing them or re-investing but they start the cycle as new purchases. Hope this clarifies for you.


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## dublinhead (3 Mar 2010)

oldtimer said:


> The wording in the 'Best Buys' may be contributing to your confusion. In fact, there are two different products. Saving Bonds are for the 3 year term and Saving Certificates are for the 5.5 year term. Their terms and conditions are slightly different. The main points to remember are, if a depositor intends leaving the money for 3 years Saving Bonds are the better product. If a depositor intends leaving the money for the longer term of 5.5 years Saving Certificates are the better product. Another difference is when interest is added. With Saving Certificates interest is added every *6* months on the anniversary of the date they were purchased. With Saving Bonds interest is added every *12* months on the anniversary of the date they were purchased. I hope this answers your question and clarifies any confusion.


 
If interest on the savings bonds is added on after the 12 months anniversary, whats to stop me withdrawing my savings and getting an interest rate of 3.23% (equivalent to 4.30%) after one year? There by making the best fixed rate on the marked over 1yr


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## legal33 (3 Mar 2010)

dublinhead said:


> If interest on the savings bonds is added on after the 12 months anniversary, whats to stop me withdrawing my savings and getting an interest rate of 3.23% (equivalent to 4.30%) after one year? There by making the best fixed rate on the marked over 1yr


 
Because the 3.23% is the average over 3 years. You get something like 2% in the first year and 4.5% in the last year. There's a breakdown of what you get exactly on www.anpost.ie


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## theresa1 (26 Jul 2010)

Could I actually lodge say a cheque for €120,000 in savings certificates for 5.5 years. After 6 month's the interest earned would take me over €120,000 -is that ok? I have €212,000 at 2.8% with Anglo and I want to find some a/c's to move it into to make more interest and be as safe as possible. I dont think I could do the 10 year bond.


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## oldtimer (27 Jul 2010)

An individual can invest a maximum of €120,000 in saving certificates of the current issue. The interest taking it over this amount is irrelevant. The maximum for joint holders is €240,000. If an individual has €120,000 in saving certificates of the current issue he/she can additionally invest a maximum of €120,000 in saving bonds. Personally I think you are correct regarding the 10 year bond. Its length, terms and conditions are restrictive compared to saving certificates and saving bonds.


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## theresa1 (27 Jul 2010)

Thanks oldtimer - i might lodge the full €120,000 in saving certificates for a start.


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## donnyman (23 Sep 2010)

Hello,

I have a question regarding the maximum holding of Saving Certificates one is allowed to have. 

It says on the brochure that if you are single you are allowed to hold 120,000 euro worth except where as I understand it (and this is my question) you reinvest all or some of the proceeds of maturing Installment Savings, Saving Bonds and other Saving Certificates into buying further Savings Certs.

Accordingly your holding of Saving Certs can exceed the 120,000 limit if you keep reinvesting and the limit only applies if you buy Saving Certs with new monies as it were.

Am I right in my interpretation?


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## boe (24 Sep 2010)

donnyman said:


> Hello,
> 
> I have a question regarding the maximum holding of Saving Certificates one is allowed to have.
> 
> ...


 
Yes, that would be the way I would read it as well.


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## donnyman (24 Sep 2010)

Thanks for that boe. 

I sent an e-mail off to the customer service at State Savings last night asking them about it. As soon as I have an answer I will post it up.


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