# Calculator National Solidarity Bond v An Post Savings Certificates



## Daddy (14 Aug 2011)

Is there any calculator available on comparing these.

If not what is 50k worth after 5 yrs 6 months in Savings Certifcates.

Also, what is 50k worth after 10 yrs in the Solidarity Bond.

Thanks


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## The Ghoul (14 Aug 2011)

I can't post a link but go to statesavings.ie and download brochure 2 and brochure 3.

If you invest your 50k in a savings cert, after 5.5 years it'll be worth 60,500
If you invest your 50k in the 10 year solidarity bond, after 10 years it'll be worth 73,650

If you encash early you may be much better off with the cert than the S bond - AFAIK much of the gain from the S bond is from a bonus at the very end whereas the cert gains interest more steadily and interest is calculated every 6 months. The brochures will explain this. Remember that there is no DIRT with the cert but there is with the S bond so you will see gross and net figures for the S bond.

If there is an increase in DIRT in coming budgets this may affect the returns from the S bond but won't affect the cert.


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## Daddy (14 Aug 2011)

Thanks for that.


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## Black Rock (15 Aug 2011)

*NTMA State Savings*

*“Grossed Up Rate” - *given the favourable tax treatment of NTMA State Savings™ products, when drawing up comparative rates tables, for accuracy, it is grossed up rates that are needed for comparison with other products offered by financial institutions, which are subject to DIRT at 27% on the full amount of the interest paid. The grossed up rate is calculated by taking the net after tax rate that is actually paid out by the NTMA (as shown in table below) and dividing that figure by 73 and multiplying by 100 (this provides for the 27% DIRT rate).



*Table 1(a) - “**Grossed Up" **Total Return *

…….........10 Year......5 ½ Year.....4 Year........3 Year
…….........National.....Savings.......National.... ..Savings 
..............Solidarity...Certificate...Solidarit y.....Bond
*END*.......Bond...........................Bond
*YEAR__________________________________*
1.......... 1.00%........2.88%........1.00%........*3.01%*
2.......... 2.00%........6.30%........2.00%........*7.12%*
3.......... 3.00%......10.96%........3.00%......*13.70%*
4.......... 4.00%......16.71%......*19.07%*
5.........18.70%......*23.97%*
5½....... 0.00%......*28.77%*
6.........19.70%
7.........*37.14%*
8.........*38.14%*
9.........*39.14%*
10.......*64.79%*


*Table 2(a) - NET RETURN -This is the net return actually paid out by NTMA after tax / tax free *

…….........10 Year......5 ½ Year.....4 Year........3 Year
…….........National.....Savings.......National.... ..Savings 
..............Solidarity...Certificate...Solidarit y.....Bond
*END*.......Bond...........................Bond
*YEAR__________________________________*
1.......... 0.73%........2.10%........0.73%........*2.20%*
2.......... 1.46%........4.60%........1.46%........*5.20%*
3.......... 2.19%........8.00%........2.19%......*10.00%*
4.......... 2.92%......12.20%......*13.92%*
5.........13.65%......*17.50%*
5½....... 0.00%......*21.00%*
6.........14.38%
7.........*27.11%*
8.........*27.84%*
9.........*28.57%*
10.......*47.30%*


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## WizardDr (15 Aug 2011)

..er buy Government Bonds with yields far higher than all this ..if you are buying securities like these - potential capital gain as well -


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## 149oaks (16 Aug 2011)

Where does 1 buy Gov't bonds? Is it in An Post or do you need to go to a stockbroker?


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## Black Rock (16 Aug 2011)

*NTMA State Savings - personal retail savings bonds versus wholesale bonds*

Go to the NTMA website www.NTMA.ie There is list of 9 Irish brokers, with names & contact numbers, and it shows the fees that each broker charges. See under "Government Bonds" and then "Where to Buy Bonds" http://www.ntma.ie/Publications/2009/WhereBuyBonds.pdf. 

Last night's interest rate or yield is shown under "Outstanding Bonds". At the top of that web page there is pdf called "Today's Irish Government Bonds Outstanding Report" which is updated daily. 
[broken link removed]

While these wholesale Irish Government bonds currently pay a high return they are taxed at your marginal tax rate (20% or 41%), and subject to the universal social charge and may also be subject to PRSI. 

On the other hand the retail Government savings products (which carry the same risk) known as NTMA State Savings (see 4 brochures on their website homepage at www.StateSavings.ie) pay lower gross interest but the tax treatment is more favourable (either low or no tax) and this may produce in a higher net after tax return. 

The other issue to consider is that with wholesale Government Bonds early encashment before the final maturity date could result in a loss of principal (or a capital gain). 
With the personal “NTMA State Savings” products the saver may request their money back from the NTMA at any time (with 7 days notice) and the full principal amount plus any interest due will be repaid without penalty or deduction. The amount repaid will never be less than the original amount deposited. (However, Prize Bonds cannot be encashed until 3 months after purchase).

In respect of the “wholesale / institutional” Government Bonds there is no provision for early repayment by the NTMA. Accordingly, a holder of such bonds who wishes to liquidate their investment so as to obtain their funds before the redemption date can only do so by selling the bonds on the secondary market through the brokers listed at [broken link removed]

The amount they will obtain in the secondary market depends on the prevailing market price of the bond on the day of the sale – wholesale bond prices fluctuate daily. 

If the bond holder sells the bond on a day that the sale price is less than the price at which he originally purchased the bond he will receive back less money than he originally paid for the bond. Of course if prices have increased since he purchased the bond he will be able to sell the bond for more money than he had originally paid.


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## Daddy (16 Aug 2011)

Thanks Black Rock for those very informative posts.

One could add I suppose that Government bonds come with a much higher risk of a hair cut and that An Post products would likely be the last to get hit.(Based on various posts I have read elsewhere)

In your opinion if you had 50k and you did'nt need the money for 10 years which of the products would you choose right now:

An Post Savings Bonds
An Post Savings Certs
Solidarity 4 year bond
Solidarity 10 year bond

Thanks


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## Black Rock (16 Aug 2011)

*NTMA State Savings - personal retail savings bonds versus wholesale bonds*

*All Irish Government debt instruments rank equally relative to one another*
In line with the normal practice in the sovereign debt markets, Ireland has never issued any debt with either a preferred status or a subordinated status relative to any other debt it has issued, i.e. all debt issued by Ireland ranks equally (pari passu) and enjoys identical status. 

From a risk perspective there is no distinction between any of the products listed below (in blue). The distinquishing characteristics (between the Irish Government's personal savings products versus the Irish Government's wholesale / institutional bonds) is that there are differences in tax treatment and in the provision for early encashment. 

*All* Government savings / investment products are offerd by and managed by the NTMA. Some products are offered to individual or personal savers and others are offered to wholesale / institutional investors. *The NTMA State Savings products offered by the Government to individuals rank equally with the Irish Government Bonds and Treasury Bills offered to wholesale / institutional investors.*

The repayment of all money borrowed by the Irish Government (whether from personal savers or from wholesale / institutional investors) is a direct unconditional obligation of the Irish Government. The full list of Irish Government personal savings products offered by the NTMA is as follows - 
·3 Year Savings Bonds
·4 Year National Solidarity Bonds 
·5½ Year Savings Certificates
·6 Year Instalment Savings
- Childcare Plus 
·10 Year National Solidarity Bonds 
·Deposit Account Plus 
·Ordinary Deposit Account
- Childcare Save 
- Pension Save 
·Prizebonds

Full details of all these NTMA State Savings products are available at www.StateSavings.ie - money placed in any of the NTMA State Savings products is never "locked away". Irrespective of the original term you can always ask for some or all of your money back at any time subject to 7 days notice. 

The Irish Government products which are offered to wholesale / institutional investors are as follows - 
·Irish Government Bonds 
·Irish Government Treasury Bills 

The current wholesale / institutional bonds are listed at http://www.ntma.ie/GovernmentBonds/D...utstanding.pdf 

*All of the above products (in blue) are part of the "Irish Government debt" or "Sovereign debt of Ireland".*

The term _"An Post Savings Bonds"_ or _"An Post Savings Certificates__" _is not accurate - if you check the published annual accounts of the post office (An Post) you will notice there are no statistics on "Post Office Savings" or "Government Savings" at all. The reason for this is that An Post are an Agent of the NTMA in respect of the NTMA State Savings products. An Post do not hold on to, or manage any “NTMA State Savings” money but instead, every day,they hand such money over to the NTMA, where it is managed alongside all other "Sovereign Debt" that the NTMA manages. More details available in the Annual Report and Accounts of the National Treasury Management Agency http://www.ntma.ie/Publications/2011/NTMA_Annual_Report_2010_English.pdf
(within the pdf go to page 11 of 123).


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## 149oaks (16 Aug 2011)

Thanks Blackrock for the info. What is the Yield to maturity? Is it the equivalent to AER? I'd like to know how I compare say Post Office Bonds & Certs AER to this AER (obvoulsly taking care to include the tax treatment of Gov't Bonds).


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