# State Savings (NTMA) bonds and certs looking good



## The Ghoul

With the increase in DIRT and the ECB lowering interest rates, who thinks that now is a good time to fill one's boots with State Savings fixed term deposits of 3 years (bonds) and 5.5 years (certs)

An individual is allowed to buy 120k in bonds and 120k in certs. If you have your 240k and it grows to say, 276k when your bonds and certs mature, the 276k can be reinvested i.e. the limits do not apply when reinvesting, at least for the first reinvestment. Can anyone confirm this?

As these products are DIRT exempt they became more attractive when the DIRT rate was raised to 30% in Budget 2012. If the DIRT rate is raised again in forthcoming budgets - could happen - they'll look better again. 

These products are not the National Solidarity Bond, DIRT is payable on it. 

If bank deposit interest rates start to come down thanks to the ECB it could be good to be "locked in" for 3 or 5.5 years. Yet if the depositer wants to withdraw his money it's not really locked in - it can be gotten at any time with 7 days notice. The penalty for early encashment is related to the fact that interest is accrued every 6 months for a cert or every year for a bond rather than daily. So if someone buys a bond and cashes it in, say, 364 days later, he gets no interest.


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## Slim

The Ghoul said:


> With the increase in DIRT and the ECB lowering interest rates, who thinks that now is a good time to fill one's boots with State Savings fixed term deposits of 3 years (bonds) and 5.5 years (certs)
> 
> An individual is allowed to buy 120k in bonds and 120k in certs. If you have your 240k and it grows to say, 276k when your bonds and certs mature, the 276k can be reinvested i.e. the limits do not apply when reinvesting, at least for the first reinvestment. Can anyone confirm this?
> 
> As these products are DIRT exempt they became more attractive when the DIRT rate was raised to 30% in Budget 2012. If the DIRT rate is raised again in forthcoming budgets - could happen - they'll look better again.
> 
> These products are not the National Solidarity Bond, DIRT is payable on it.
> 
> If bank deposit interest rates start to come down thanks to the ECB it could be good to be "locked in" for 3 or 5.5 years. Yet if the depositer wants to withdraw his money it's not really locked in - it can be gotten at any time with 7 days notice. The penalty for early encashment is related to the fact that interest is accrued every 6 months for a cert or every year for a bond rather than daily. So if someone buys a bond and cashes it in, say, 364 days later, he gets no interest.


 
Thinking along similar lines. €120k over 3 years in state savings @10% = 12000 tax free. similar deposit at 3.25% returns about €8377 net, difference of €3622. Other factors would include access and aloss of interest if you break state savings etc, security of state guarantee.


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## rover

Hi Ghoul

What's your view on the security of these savings versus bank deposits (€100k) and other instruments like German Bonds?


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## The Ghoul

Maybe Ciaran could update his best buys thread to take account of the DIRT changes. By my calculations:

3 year Savings bond 3.23% AER "net"
To get this rate from a bank account, the account would need to pay 4.61% (up from 4.42% before the DIRT increase) AER gross

5.5 year Savings cert 3.53% AER "net"
To get this rate from a bank account, the account would need to pay 5.04% (up from 4.84% before the DIRT increase) AER gross. 

Therefore 4.61% and 5.04% are the rates which should be used when comparing these products with bank deposit accounts.

BTW pensioners below a certain income threshold are exempt from paying DIRT so they should ignore the above.


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## camlin90

Can the best buys be updated for this please? Thanks.


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## The Ghoul

CiaranT's updated best buys have different rates to the ones I calculated. Eg Ciaran's post has the "grossed up" AER for the savings cert going from 4.84 to 5.27%. I think the new figure should be 5.04%. 

I got this by dividing 3.53 by (1-0.30) where 0.3 is the new DIRT rate. Previously it would have been 3.53 divided by (1-0.27)

Who is right?

Edit: I think Ciaran is using a new DIRT of 33% does this rate not only apply to savings which are truly "locked in" for more than 1 year?


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## Lightning

Sorry for the delay in updating the 2012 DIRT rates in the best buys, I was waiting for the resident expert of State Savings products to help me. 

BlackRock, has kindly provided the below information with regard to how to calculate the "grossed up" AER rates. Specifically, the rates have been taken from the bold figures in table 4A below. 

Please see below BlackRock's explanation as to why the 33% rate should be used. I will add a note to the best buys. 



			
				Black Rock said:
			
		

> *State Savings - Budget 2012 - Grossed Up Rates *
> 
> *The NTMA has published revised interest rates resulting from the DIRT increase from 27% to 30% in Budget 2012. If you go to *
> *http://www.ntma.ie/PersonalSavings/personalSavingsIntro.php*
> *and then to the bottom of the page there are two pdf files. *
> *· A Guide to NTMA State Savings™ *
> *· State Savings - interest rates January 2012 *
> 
> *Using the after tax tables (2 and 4) in the second pdf at http://www.ntma.ie/Publications/2011/State_Savings_interest_rates_January2012.pdf  to gross up the net rates, to enable comparison with with the gross  rates paid on products offered by financial institutions, apply the new  Budget 2012 DIRT rates as follows*
> *· 30% where interest is paid annually or more frequently *
> *and *
> *· 33% where interest is paid less frequently than annually.*
> 
> *To “Gross Up” the net after tax  rate must be divided by 70 and multiplied by 100 (if applicable DIRT is  at 30%) and divided by 67 and multiplied by 100 (if applicable DIRT is  at 33%) *
> 
> *In respect of both the 4 and 10 year National Solidarity Bond interest is paid annually so use the 30% rate. *
> 
> *In respect of Savings Bonds and Savings Certificates where interest is paid at end of year 1 use the 30% rate. *
> *However, these two products do  not normally pay annual interest as all interest is paid on encashment.  Therefore where encashment takes place in year 2 or longer use the 33%  rate. *
> 
> *Using these rules produces two tables  – *
> 
> *Table 3a shows the “Grossed Up” Total Return*
> *Table 4a shows the “Grossed Up” AER*
> 
> 
> *Table 3A – Total Return“Grossed Up Rate” *
> 
> *End .......10 Year......5 ½ Year.....4 Year........3 Year*
> *Year.......National.....Savings.......National.......Savings *
> *.............Solidarity....Certificate...Solidarity.....Bond*
> *END.......Bond...........................Bond*
> *YEAR__________________________________*
> *1.......... 1.00%........3.00%........1.00%........3.14%*
> *2.......... 2.00%.......6.87%.........2.00%........7.76%*
> *3.......... 3.00%.......11.94%.......3.00%.......14.93%*
> *4.......... 4.00%.......18.21%......19.71%*
> *5..........19.29%......26.12%*
> *5½....... 0.00%........31.34%*
> *6.......... 20.29%*
> *7..........38.43%*
> *8..........39.43%*
> *9..........40.43%*
> *10........67.14%*





> *Table 4A - AER (Annual Equivalent Rate) “Grossed Up Rate” *
> 
> End .......10 Year......5 ½ Year.....4 Year........3 Year
> Year.......National.....Savings.......National....  ...Savings
> .............Solidarity....Certificate...Solidarit  y.....Bond
> END.......Bond...........................Bond
> YEAR__________________________________
> 1.......... 1.00%........3.00%........1.00%........3.14%
> 2.......... 1.00%........3.39%........1.00%........3.84%
> 3.......... 1.00%........3.88%........1.00%........*4.82%*
> 4.......... 1.00%........4.36%........*4.70%*
> 5.......... 3.67%........4.90%
> 5½....... 0.00%........*5.27%*
> 6.......... *3.20%*
> 7.......... *4.94%*
> 8.......... *4.41%*
> 9.......... *4.01%*
> 10........ *5.61%*


The above methodology was used to calculate the grossed up AER rates. Does this clear things up?


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## mtk

The Ghoul said:


> CiaranT's updated best buys have different rates to the ones I calculated. Eg Ciaran's post has the "grossed up" AER for the savings cert going from 4.84 to 5.27%. I think the new figure should be 5.04%.
> 
> I got this by dividing 3.53 by (1-0.30) where 0.3 is the new DIRT rate. Previously it would have been 3.53 divided by (1-0.27)
> 
> Who is right?
> 
> Edit: I think Ciaran is using a new DIRT of 33% does this rate not only apply to savings which are truly "locked in" for more than 1 year?


 
I did my own calcs and i think 5.04% is right assuming dirt is 30% for each of next 5.5 years


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## Lightning

Mtk - Did you read my post above!? The applicable comparable DIRT rate is 33% and not 30% 

In respect of both the 4 and 10 year National Solidarity Bond interest is paid annually so use the 30% rate. 

In respect of Savings Bonds and Savings Certificates where interest is paid at end of year 1 use the 30% rate. 
However, these two products *do not normally pay annual interest* as all interest is paid on encashment. *Therefore where encashment takes place in year 2 or longer use the 33% DIRT rate. *


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## STEINER

I bit the bullet just before Christmas and put some savings into a 4 year national solidarity bond.  I just got fed up with paying DIRT and the return is acceptable to me.  It was hassle-free opening it up too.


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## seantheman

STEINER said:


> I bit the bullet just before Christmas and put some savings into a 4 year national solidarity bond. I just got fed up with paying DIRT and the return is acceptable to me. It was hassle-free opening it up too.


 
Did The Ghoul not say above that the National Soldarity Bond was not Dirt exempt?


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## The Ghoul

Thanks Ciaran (and Black Rock) for the clarification. I suppose this hinges on exactly when and how interest is accrued and paid. IIRC the NTMA *don't* send out statements for the bonds and certs after each accrual period stating the current value if encashed. If they did do this would the lower DIRT be the one to use for the "grossed up" calculation?

I also presume that the lower DIRT rate is applicable for most/all multi year fixed term deposit bank accounts.

I think we need to be careful to compare like with like here in the best buys thread. Someone comparing, say, a 3 year term deposit with an NTMA savings bond needs to be aware that the grossed up rate for the bond includes DIRT at 33% whereas the gross rate for the bank term deposit includes DIRT at 30%. I am a fan of the State Savings products but I wouldn't like someone to think that they are better than they are.





> Did The Ghoul not say above that the National Soldarity Bond was not Dirt exempt?


It's not fully DIRT exempt but the "bonus" is DIRT exempt.

Eg for the 4 year solidarity bond



> Gross return of 15% over 4 years on your investment (Gross AER 3.56%)
> 
> Comprises 4 annual interest payments of 1%, subject to the prevailing DIRT rate, plus a tax free maturity bonus of 11% after 4 years (Net return 13.92%, net AER 3.31%)
> 
> 4 year term
> 
> Fixed rate of return
> 
> Maturity Bonus of 11% (Tax Free to Irish Residents)


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## STEINER

seantheman said:


> Did The Ghoul not say above that the National Soldarity Bond was not Dirt exempt?



yes there is DIRT OF 30% on the 1% annual interest, but the DIRT free 11% bonus makes it worthwhile for me.


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## Lightning

The Ghoul - Thanks for your comments. I see where you are coming from. 

This NTMA guide here gives a good guide to what lower rate of interest you get if encashment takes place early. 



The Ghoul said:


> I also presume that the lower DIRT rate is applicable for most/all multi year fixed term deposit bank accounts.



Varies. Certainly not all. AIB, for example, only pay on maturity with some of their term deposit products. 

However, I take your point that most term deposits pay interest at least annually. Practically, this may skew the comparison. However, technically, the comparable DIRT rate is correct at 33%. 

Hmmmm. I guess it all boils down to accuracy and fairness. I can see your argument that 30% might give a more representative comparable view.  I can also see the argument that 33% gives an accurate view. 

Further comments welcome. I will PM BlackRock as I would like to hear his view on this.


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## TheJackal

These are looking like very attractive saving options now.

Re the 30% v 33% argument, I'd prefer 30% myself as this is the rate most people will be comparing it with.


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## Lightning

Thanks for all the feedback. 

I have changed the comparable grossed up AER rate to 30%.


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## mullking

Can someone please calculate for me, based on my current position and rates remaining as they are, my question is-----------1) Exactly what would my cash return be if I invested €100,000 in year 1 with A.I.B. at 4.1%. In year 2 I re-invested 100,000 + interest-dirt @30% and in year 3 did the same again. 2) What would be my cash return if I put the 100000 in government bonds for 3 years.


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## The Ghoul

> Can someone please calculate for me, based on my current position and rates remaining as they are, my question is-----------1) Exactly what would my cash return be if I invested €100,000 in year 1 with A.I.B. at 4.1%. In year 2 I re-invested 100,000 + interest-dirt @30% and in year 3 did the same again. 2) What would be my cash return if I put the 100000 in government bonds for 3 years.


 
AIB: 4.1% gross, 2.87% net
Year 1: 102,870
Year 2: 105,822
Year 3: 108,859

An Post 3 year bond
Year 1: 102,200
Year 2: 105,200
Year 3: 110,000


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## kdoc

*State Savings are not just looking good - they are looking great.*

I have two 3 year certs due to mature shortly. My initial investments were €62,107 and €20,770. Reading comments on this forum over the last couple of years made me very jittery and, on more than a few occasions, I almost jumped ship. But I am delighted I held my nerve. For my outlay (and a lot of unnecessary worry) I gained a nice neat pot of interest: €8,287 to be precise.


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## ClubMan

€8,287 on €82,877 over 3 years seems to be 3.23% _CAR_. Is that not approximately on par with net deposit rates over the same period?

www.investopedia.com/calculator/CAGR.aspx


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## Billo

DIRT was probably not deducted.


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## kdoc

Yep, it's a DIRT free zone.


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## Daddy

Does the dirt going up have a big effect on the 10 year bond from 27 to 30 per cent.    For example if I put in 50k what would the return have been over 10 years if the dirt tax had remained at 27 per cent.    Now what would the return be if I put in 50k with dirt at 30per cent.
Lastly there is a good chance that the govt will keep on increasing the dirt and say they increase it to 40 per cent and I had 50k in for a full 10 years does the final amount reduce by a big amount to make the certs or bonds a better buy.    Thanks.


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## The Ghoul

I thought I'd revisit this thread seeing as many of the banks have reduced their deposit rates in recent weeks while there have been no reductions in the State Savings rates. I have "filled my boots" with savings certs and bonds but cannot buy any new ones as I'm up to the limit for both. Am now considering the 4 year solidarity bonds, prize bonds and 10 year solidarity bonds in that order. 

None of them appeal to me as much as the savings certs and bonds but they are still pretty good. I'm reluctant on the 10 year solidarity bond as 10 years is a long time and there is a big penalty for early encashment. Also, both solidarity bonds are partially subject to DIRT which I believe is likely to increase again in the Budget.

One thing that I notice about the State Savings products is even with the good interest rates they seem to get very little coverage in the media, maybe they are regarded as unsexy  When there is coverage it is often negative (eg Jill Kerby's "prize idiots" comments) 

Anyone have any thoughts on any of this?


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## Marc

Let's start with Prize Bonds. According to the 2011 report and accounts there is currently a little over €1.4Bn "invested"

The Value of prizes awarded was €42M Or 3% of the value of the fund as stated in the sales literature.

The first observation is that the press on Friday reported that Ireland had returned to the bond market; "The Government paid interest of 5.9pc to borrow for five years and 6.1pc to borrow for eight years with the deals.

That is well above the 3.5pc it pays to borrow from the eurozone rescue funds, but the higher interest was needed to tempt investors back after a two-year absence."

NTMA operates both Prize Bonds and Bond auctions we can therefore conclude that Prize Bonds are a very good investment - for NTMA. The State is saving a shed load of interest here by not paying a market or even bailout rate of interest on this money. In fact on average the interest saved is easily as large as the total prize fund paid in any year. 

So buying prize bonds and the solidarity bond is very patriotic but don't confuse this with it being a prudent investment - it isn't.

But even declaring a return of 3% is misleading unless one holds every single prize bond ever issued you won't win every prize and therefore the expected return will vary from this 3% for everyone.

Some people will win big and their return will be significantly more that 3%.

But *most* people will not win big prizes and therefore their experience will be worse than this.

If we strip out the rare large prizes, the prize fund reduces to around 31.7M which is just under 2.2% of the total fund. A "regular" bank saving account would need to be paying about 3.14% Gross to match this for an investor subject to DIRT. Of course even this 2.2% return isn't guaranteed but would represent a more meaningful description of most peoples likely experience.

So to sum up most people could "expect" a tax free return of about 2%pa with an extremely slim chance of winning a larger prize. Prize bonds therefore are a lottery. You gamble the certainty of bank interest in return for the right to dream that you might win a million despite the fact that you almost certainly won't - but you still could right? It's just clever manipulation of our inherent biases in the face of uncertainty. 

We ignore the probable outcomes and the damage that failing to keep pace with inflation will have to our savings. We ignore the risk of default and the fact that Ireland is independently rated BBB+ by Standard & Poors  because State Savings are guaranteed despite the fact that when Ireland goes to the market to borrow it has to pay nearly 6% for 5 year money.

The optimum holding in prize bonds is probably €25 since this gives you the right to lie in bed on a Sunday morning and dream what you would do with €1m? Anything more than this is just a triumph of hope over numeracy. But thanks for keeping everyone else's costs down. Imagine if no one put their money into State Savings products, Ireland would have to pay about 6% on all the debt. At the end of 2010 NTMA had €12.6 BN in various State savings products if the interest differential was 3% across the board then Irish citizens would be assisting the State to the tune of about €378 Million each year.


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## The Ghoul

Marc said:


> Let's start with Prize Bonds. According to the 2011 report and accounts there is currently a little over €1.4Bn "invested"
> 
> The Value of prizes awarded was €42M Or 3% of the value of the fund as stated in the sales literature.
> 
> The first observation is that the press on Friday reported that Ireland had returned to the bond market; "The Government paid interest of 5.9pc to borrow for five years and 6.1pc to borrow for eight years with the deals.
> 
> That is well above the 3.5pc it pays to borrow from the eurozone rescue funds, but the higher interest was needed to tempt investors back after a two-year absence."
> 
> NTMA operates both Prize Bonds and Bond auctions we can therefore conclude that Prize Bonds are a very good investment - for NTMA. The State is saving a shed load of interest here by not paying a market or even bailout rate of interest on this money. In fact on average the interest saved is easily as large as the total prize fund paid in any year.
> 
> So buying prize bonds and the solidarity bond is very patriotic but don't confuse this with it being a prudent investment - it isn't.


If a person (say a PAYE worker in the 41% tax bracket) purchases Irish government bonds @ 6% what's their net return after fees, tax, USC etc. 

I agree that the return on prize bonds is not great at around 2.2% net or 3.14% "grossed up". However the point is that with bank deposit rates falling and possible DIRT increases in the future, prize bonds start to look better.

BTW inflation was 1.7% in the year to June and has been low in the last few years. Prize bonds returning 2.2% have performed better than some other "investments" in this time.


			
				Marc said:
			
		

> Imagine if no one put their money into State Savings products, Ireland would have to pay about 6% on all the debt. At the end of 2010 NTMA had €12.6 BN in various State savings products if the interest differential was 3% across the board then Irish citizens would be assisting the State to the tune of about €378 Million each year.


So what's the alternative to assisting the State - assisting the private sector financial services industry by paying fees and charges?


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## Kimmagegirl

I had funds maturing in both the Permanent TSB and Nationwide U.K. stuck them in the 3 year Savings Bonds this week. If the government introduce DIRT on these products I will be very disappointed.


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## Marc

The Ghoul said:


> If a person (say a PAYE worker in the 41% tax bracket) purchases Irish government bonds @ 6% what's their net return after fees, tax, USC etc.
> 
> So what's the alternative to assisting the State - assisting the private sector financial services industry by paying fees and charges?



I'm not suggesting that anyone buys Irish government bonds either by the way just making the point that an equivalent rate of interest to reflect the default risk would be more like 6% rather than the 3% on offer.

As for the alternative to assisting the State it's obviously the free market. As a believer in free market economics  I for one would much prefer investors to allocate their savings to the capital markets rather than shore up the State's finances since it is a more efficient  and productive use of their capital.


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## theresa1

I'm planning on moving my money from AIB Direct Deposits (was moved from Anglo to them) to State Savings. The rate's are just getting cut all the time and I think I'll go for the 3 or 5 year option with State Savings.

My question is - does anybody know of an An Post office in Dublin I can visit -bring in all document's etc. and get every thing looked after and get a receipt for lodgement of cheque. I dont fancy doing this in my local post office.


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## rover

You can go to the Post Office in Andrew Street, Dublin.


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## theresa1

rover said:


> You can go to the Post Office in Andrew Street, Dublin.


 


- sounds good - thanks!


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## connesha

Is it possible to open a second State Savings Certificates account, provided they don't exceed the €120,000 limit together?

Thanks.


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## Lightning

Yes.


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## theresa1

rover said:


> You can go to the Post Office in Andrew Street, Dublin.


 


Can you just bring original documents to show them - Passport,licence, proof of address or do you need to bring photo-copies with you?


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## theresa1

"No 3rd party cheques but those payable to account holder" - I'm planning on closing some AIB Direct a/c's so If I just simply request a cheque payment as closure from AIB, I can just take this with me and lodge into bonds or certificate a/c?


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## camlin90

I lodged a cheque for the proceeds of a PTSB account recently and there were no issues, it was made payable to me. So I'd imagine you'll be OK.


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## theresa1

camlin90 said:


> I lodged a cheque for the proceeds of a PTSB account recently and there were no issues, it was made payable to me. So I'd imagine you'll be OK.


 

- Thanks I was only with AIB as a result of being passed from Anglo and since that they closed down the very basic online service and rates just keep getting lowered.


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## The Ghoul

Buying a State Savings bond or cert from any post office is a hassle free process in my experience. I have bought certs and bonds ranging from 200 euro to 70,000 euro. It is no problem if you are lodging a mix of drafts, cheques and cash (although there may be a limit in how much cash they'll take at one time) AFAIK it's possible to use a laser/debit card as well. 

It takes about 5 minutes at the counter. In contrast to depositing money in a bank, you won't have to make an appointment and you won't get a sales pitch from some "advisor" trying to sell you a different product.

Have all your documentation ready and have the form printed and filled in beforehand
http://www.statesavings.ie/Downloads/ApplicationForm.pdf

Once you have your certs and bonds bought you do not have to visit the post office again when reinvesting as everything is done by post with freepost envelopes provided.


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## theresa1

Great post The Ghoul - will be moving most of my money into state savings. Every day I seem to dislike the banks even more but the bottom line is the rates just dont match up to state savings.


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## Lightning

theresa1 said:


> but the bottom line is the rates just dont match up to state savings.



Yes and no. 

For short to medium term deposits, under 3 years, banks offer better rates (e.g. Ulster @ 3.83%). 

For lump sum variable rate products, banks (KBC @ 3.25%) marginally offer higher rates than State Savings (30 day notice @ 3.00%). If rates continue to plunge, then State Savings may eventually lead the variable rate pack. 

State Savings destroy the banks when it comes to long dated term deposit products. There is no rate competition from the banks. 

It is not beyond possible that the NTMA will adjust State Savings rates downwards, but given the national deficit refinancing needs, over the coming years, State Savings rates may stay static.


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## seantheman

CiaranT said:


> It is not beyond possible that the NTMA will adjust State Savings rates downwards


 
If i take out a state savings product for 3 or 5 years tomorrow, will i get the current rate on maturity even if rates are adjusted downwards in the future? 
Similarly can DIRT be introduced retrospectively to these products at (budget) anytime?


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## The Ghoul

seantheman said:


> If i take out a state savings product for 3 or 5 years tomorrow, will i get the current rate on maturity even if rates are adjusted downwards in the future?
> Similarly can DIRT be introduced retrospectively to these products at (budget) anytime?


The interest rates and terms and conditions for State Savings products are in various Statutory Instruments eg for savings certs
http://www.irishstatutebook.ie/2007/en/si/0827.html

I had a look at this legislation to see if there is a "get out" that allows the conditions for already purchased products to be changed - couldn't find any. Therefore it seems to me that the law would have to be changed. It would be a drastic move for the State to attempt to alter the terms and conditions for already purchased bonds and certs. It would be politically suicidal and who would ever purchase any of the products ever again if it happened.

So IMO it is highly unlikely that they would retrospectively introduce DIRT or change the rate.


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## harriet

CiaranT said:


> Yes and no.
> 
> For short to medium term deposits, under 3 years, banks offer better rates (e.g. Ulster @ 3.83%).
> 
> For lump sum variable rate products, banks (KBC @ 3.25%) marginally offer higher rates than State Savings (30 day notice @ 3.00%). If rates continue to plunge, then State Savings may eventually lead the variable rate pack.
> 
> State Savings destroy the banks when it comes to long dated term deposit products. There is no rate competition from the banks.
> 
> It is not beyond possible that the NTMA will adjust State Savings rates downwards, but given the national deficit refinancing needs, over the coming years, State Savings rates may stay static.


 

Ciaran T I am looking at moving money from an account I have that I don't need for a couple of years - how long is long term with Stage Savings scheme


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## so-crates

Ten years is I believe the maximum on the State Savings

[broken link removed]


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## Lightning

harriet said:


> Ciaran T I am looking at moving money from an account I have that I don't need for a couple of years - how long is long term with Stage Savings scheme



State Savings offer market leading rates on their 3 year to 10 year term deposit products.


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## The Ghoul

Re: state savings vs Ulster Bank shorter term deposits, here is a compound interest calculator that is useful for predicting what you *might* earn from a 1 year fixed term deposit if you reinvest it for 2, 3, 4 etc years. That's assuming rates and DIRT stay the same - which are pretty big assumptions.
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Let's say you have 10,000 to invest. UB's 1 year account pays 3.75% gross. If you open this account and after 1 year reinvest at the same rate and same DIRT for another year, after year 2 you'll have 10,532.92

If you buy a State Savings bond with your 10,000 and encash it early after year 2 you'll have 10,520. Slightly less than the UB but it is guaranteed unlike the UB return which is subject to the assumptions I described above.


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## askU

The Ghoul said:


> Re: state savings vs Ulster Bank shorter term deposits, here is a compound interest calculator that is useful for predicting what you *might* earn from a 1 year fixed term deposit if you reinvest it for 2, 3, 4 etc years. That's assuming rates and DIRT stay the same - which are pretty big assumptions.
> http://www.moneychimp.com/calculator/compound_interest_calculator.htm
> 
> Let's say you have 10,000 to invest. UB's 1 year account pays 3.75% gross. If you open this account and after 1 year reinvest at the same rate and same DIRT for another year, after year 2 you'll have 10,532.92
> 
> If you buy a State Savings bond with your 10,000 and encash it early after year 2 you'll have 10,520. Slightly less than the UB but it is guaranteed unlike the UB return which is subject to the assumptions I described above.



If you withdraw after yr2 with an post - do you lose all interest?


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## The Ghoul

askU said:


> If you withdraw after yr2 with an post - do you loose all interest?


Obviously you lose the interest for year 3 but you get the interest for years 1 and 2 provided you wait until the anniversary date. If you encash before the anniversary date you lose a year's interest. Eg if you encash after 1 year and 364 days you lose all the interest for year 2. 

With savings cerst there is an anniversary date every 6 months whereas with bonds it's every year.


----------



## Daddy

Just on saving certs and bonds - wondering when is the next likely date that these will be reviewed -  the current issues I presume have a certain date by which one must purchase.  In all likelihood the next issues will come with lower interest rates in light of all institutions reducing their deposit rates.   So is there a date one must get in by while the very attractive rates are still available.


----------



## The Ghoul

IMO its hard to predict when the next change will be and how the interest rate will go. Given the cost of borrowing on the markets, State Savings products seem to be a good deal for the State and individual savers are happy enough with them too. So I could see the current issue lasting for a while yet 

In the case of savings certs, from irishstatutebook.ie: 

17th (and current) issue was introduced on 1/8/2007 interest 21%
16th issue was introduced on 23/12/98, interest 16%
15th issue was introduced on 5/5/98, interest 25%

There were amendments to the 16th issue in 2004 and 2006 to make some changes including increasing the maximum holding but the interest rate did not change.

I wonder why there was such a short gap between the 15th and 16th issues.


----------



## Lightning

I would guess that the NTMA will wait until the we properly return to the market, if that happens, before they make any changes. However, the State Savings 30 day notice account rate might change sooner. 

The Ghoul - Thanks for sharing the location of historic State Savings interest rates. I enjoyed reading through the deposit rates over the last few decades!


----------



## 149oaks

I have a Bond that is due to mature shortly. What happens if I do nothing i.e. will it be re-invested in another Bond if I don't want to take out the money? Or will I have to cash it and purchase another?


----------



## The Ghoul

149oaks said:


> I have a Bond that is due to mature shortly. What happens if I do nothing i.e. will it be re-invested in another Bond if I don't want to take out the money? Or will I have to cash it and purchase another?


Before the maturity date, they will write to you and enclose a form. If you want to reinvest you tick some boxes on the form and send it back to them (freepost) with your bond enclosed. You can also choose full or partial repayment or can choose a different State Savings product on the form.


----------



## 149oaks

Thanks for that Ghoul


----------



## helvetica

Marc said:


> I'm not suggesting that anyone buys Irish government bonds either by the way just making the point that an equivalent rate of interest to reflect the default risk would be more like 6% rather than the 3% on offer.
> 
> As for the alternative to assisting the State it's obviously the free market. As a believer in free market economics  I for one would much prefer investors to allocate their savings to the capital markets rather than shore up the State's finances since it is a more efficient  and productive use of their capital.



Marc, this seems like a good point, the return is relatively low if you consider the bigger risk picture. I would love to know your thoughts on any specific areas of the capital market you would consider investing in for a similar risk profile. Maybe not an alternative, but to compliment a state savings bond/cert. any recommendations? Cheers


----------



## Lightning

*SBP: State Savings Deposits Double, Banks Pressure NTMA for Rate Drop*

According to The Sunday Business Post:


1.4 billion EUR increase in State Savings deposits this year.
State Savings deposits have doubled from 7 billion EUR in 2007 to 14 billion EUR today.
Banks have started lobbying the DoF to reduce State Savings rates. 

It has been many years since the NTMA have reduced their State Savings rates. It is clear that direct pressure is now on the NTMA/DoF to reduce the State Savings rates. Surely, the NTMA will have to give with some, but maybe not all, of the State Savings rates. Hence, there might be limited time to bag high State Savings rates.


----------



## Boscod

Listened to the business news on RTE radio this morning. The discussion was about Greece, and the possibility of another write down of their government debt, post the German elections in 2013. The contributor (can't recall his name) then went on to say, if Greece's debt was reduced, that could then leave the door open for Ireland and Spain to follow suit. 

Any views on how/if these state savings products could be impacted in such an event?


----------



## Lightning

Boscod said:


> Any views on how/if these state savings products could be impacted in such an event?



Official speaking, the IMF/EU/ECB have primary creditor. Everyone else, including State Savings, have secondary creditor status. Secondary creditors would be subject to a haircut if there is a debt restructuring.


----------



## kdoc

Given the news from he budget, State savings are looking better than ever.


----------



## kamakaze J

The Ghoul said:


> Obviously you lose the interest for year 3 but you get the interest for years 1 and 2 provided you wait until the anniversary date. If you encash before the anniversary date you lose a year's interest. Eg if you encash after 1 year and 364 days you lose all the interest for year 2.
> 
> With savings cerst there is an anniversary date every 6 months whereas with bonds it's every year.



If I plan on only saving for 2 years + 1 day is there any point in going for the 3year one rather than the 5year 6months one so as the interest rate is better on the longer term one?


----------



## oldtimer

kamakaze J said:


> If I plan on only saving for 2 years + 1 day is there any point in going for the 3year one rather than the 5year 6months one so as the interest rate is better on the longer term one?


If you put €1,000 in savings bonds, after two years it is worth €1052. If you put €1,000 in saving certificates after two years it is worth €1046.


----------



## Manuel

Sorry, I tried really hard to figure this out before posting. Those returns don't reflect the AER rate for either of those plans.

Can you please explain? Thanks a million ....
/M.


----------



## kamakaze J

Thanks,

Never thought to scroll down to the 2nd page of their PDF brochure- I see the difference in rates their now.


----------



## kamakaze J

Manuel,

Click on the link in the best buys and a PDF opens up- the actual rates to compare year one and year two are on the second page- missed it when I looked aswell.

Edit: I should clarify- the PDF opens up after you clink the second link; i.e the one on this page; http://www.statesavings.ie/products/Pages/default.aspx


----------



## Manuel

Thanks. Got it now ... good to know 
/M.


----------



## dobbins

CiaranT said:


> Official speaking, the IMF/EU/ECB have primary creditor. Everyone else, including State Savings, have secondary creditor status. Secondary creditors would be subject to a haircut if there is a debt restructuring.


No-one has commented on this - is that true?

From statesavings.ie:_
How are State Savings™ protected?
When you put money into State Savings™ you are placing
your money directly with the Irish Government.
The repayment of all State Savings™ money is a direct,
unconditional obligation of the Government of Ireland.
• There is no upper limit on the amount protected_


----------



## Lightning

Yes it is true, the creditor status of State Savings is pari passu with private investors in Irish sovereign debt. The CDS market gives a good judge of that risk level. 

On a related note, I have heard further rumours, and it can only be described as rumours, that State Savings are going to cut rates soon. If you are happy with State Savings, then now might be a good time to open an account.


----------



## dewdrop

As a matter of interest are rates variable or are they fixed at the rate when purchased for the term applied for.


----------



## oldtimer

dewdrop said:


> As a matter of interest are rates variable or are they fixed at the rate when purchased for the term applied for.


Yes - they fixed at the rate when purchased for the term applied for.


----------



## Lightning

dewdrop said:


> As a matter of interest are rates variable or are they fixed at the rate when purchased for the term applied for.



The State Savings instant access and 30 day notice account products have variable rates. 

The 3 year, 5 years, 5 years 6 months and 10 years products are fixed at account opening stage.


----------



## ROC8

Hi Guys, just want to get some advice. I have 100k in Rabo at mo @2.25, I assume with dirt going up 33% and deposit rates coming down its a no brainier to go to the 5.5 year state certs. I can hopefully go without the money for this time as I have 20k in credit union for any forseeable issues. What ye think?


----------



## pudds

*Savings Bonds*

Does the account opening date apply from the day you hand over the money in the p.o.


----------



## homeboy

Re: State Savings

I've noticed that interest is accrued every *six* months on saving *certificates* and every *12* months on savings *bonds*.

It's something to be aware of when cashing them in. If you make a withdrawal before the relevant anniversary then interest isn't payable for that period.


----------



## oldtimer

pudds said:


> Does the account opening date apply from the day you hand over the money in the p.o.


Yes. A receipt is handed to purchaser and the new account applies from date as stated on that receipt. The receipt bears a number and this is the official number which will appear on the bond or certificate when posted to purchaser at later date. This official bond or certificate will be dated from the day you hand over the money in the p.o.


----------



## Lightning

homeboy said:


> Re: State Savings
> 
> I've noticed that interest is accrued every *six* months on saving *certificates* and every *12* months on savings *bonds*.
> 
> It's something to be aware of when cashing them in. If you make a withdrawal before the relevant anniversary then interest isn't payable for that period.



Correct in general but it varies. 

The 10 year bond, for example, pays most, but not all, interest on maturity date and not annually. Also, some of the products pay a lower AER rate in earlier years.


----------



## pudds

oldtimer said:


> Yes. A receipt is handed to purchaser and the new account applies from date as stated on that receipt. The receipt bears a number and this is the official number which will appear on the bond or certificate when posted to purchaser at later date. This official bond or certificate will be dated from the day you hand over the money in the p.o.



that's good to know, thanks oldtimer, I will be in the P.O tomorrow so hopefully no interest rate reductions will happen over night which is probably unlightly.


----------



## Palerider

I plan on getting to the Post Office over the coming days to open a 3 year bond, I have photocopied my documents, do I need to bring originals.. anyone with experience of this ?


----------



## theresa1

Palerider said:


> I plan on getting to the Post Office over the coming days to open a 3 year bond, I have photocopied my documents, do I need to bring originals.. anyone with experience of this ?




- Bring the originals - the clerk actually photocopies them. As you already have them photocopied you could offer the clerk these but they should ask to check the originals.


----------



## ShortTerm

Is there a benefit to purchasing several bonds of smaller amounts rather than one large bond?

If one large bond is held and a partial en-cashment is required in a year or two does this affect the rate and terms paid on the remaining bond amount?

E.g. if 100k is invested and 51.1k is taken out on the first anniversary (or 52.6k on the second anniversary) will you still get 55k when the bond matures on the third anniversary?


----------



## pudds

ShortTerm said:


> Is there a benefit to purchasing several bonds of smaller amounts rather than one large bond?
> 
> *If one large bond is held and a partial en-cashment is required in a year or two does this affect the rate and terms paid on the remaining bond amount?*
> 
> E.g. if 100k is invested and 51.1k is taken out on the first anniversary (or 52.6k on the second anniversary) will you still get 55k when the bond matures on the third anniversary?



After withdrawals what ever funds remain until maturity will get the full rate. 

A lovely and very helpful girl I met in the head P.O. today actually pointed this out to me even though I didn't request any details.


----------



## Palerider

*State Savings account opening process*

I opened a 3 year state savings account at my local Post Office today, to say it was a simple and fast process undersells it. I am a person who has moved funds about to get the best rates possible over the past few years and I have often been frustrated by the time taken to get an  account opened.

An Post at least on this occasion well...take a bow ;-)


----------



## The Ghoul

Palerider said:


> I opened a 3 year state savings account at my local Post Office today, to say it was a simple and fast process undersells it.


People are filling their boots so the An Post staff are getting lots of practice 

Buying certs and bonds is hassle free.

Buying Solidarity Bonds is even easier because unlike with bonds and certs, after your first purchase, you get an ID card with your details on it. Go to the post office with your card and your money (cheque, draft, cash or debit card) and it takes about two minutes at the counter.


----------



## theresa1

Anyone have any idea the max. cash that a post office would take at a counter in notes as a lodgement?


----------



## mcriot29

I was told 9k anymore and they report you to the tax man


----------



## Lightning

*Indo: State Savings Rate Cut Likely*

http://www.independent.ie/business/banks-put-an-posts-haven-for-savers-under-pressure-3324872.html



> One option for savers would be to put more money into the state savings schemes sold by An Post. These bonds and certs have eye-watering interest rates and are tax free.
> 
> Some €17bn is invested in savings products sold by An Post. But pressure is coming from the banks, many of which are state-owned, for the Government to force down the interest on the tax-free bonds and certs.
> 
> *That is likely to happen.*
> 
> This means that it will be increasingly hard for savers to get decent returns.


----------



## The Ghoul

Quick question:

If person A owns a Savings Cert is it possible for it to be directly transferred to person B as a Savings Cert or as a different product eg Solidarity bond?

There is a process and form (see below) for changing names and addresses but it's not clear to me if you can also change to a different product at the same time.

www.statesavings.ie/Downloads/CS_ChangeNameAddressForm.pdf

Edit: re: the form - it seems to be to facilitate person A changing their name rather than to facilitate person A transferring their savings to person B. Question still stands however.


----------



## The Ghoul

To answer my own question:

From SI No. 827 of 2007



> A Savings Certificate or its benefits may not be assigned or otherwise transferred save as provided in paragraph (2) of this Rule.
> 
> 2) Subject to Rule 15 hereof, Savings Certificates held by a deceased holder may be transferred to a third party who is legally entitled to the proceeds.


----------



## theresa1

I took out a 5.5 year Savings Cert on 4th December 2012 and have still had no letter from State Savings - anyone else waiting along time? I would imagine they have been very busy. The receipt mentioned 21 days before you would get confirmation.


----------



## venice

I also took a 5.5 year savings cert out on 22 November and got confirmation about a week ago so I would say its on the way


----------



## Sue Ellen

I was told the other day that its taking on average 6 weeks for the certs to be issued.


----------



## theresa1

Great thanks venice - do you actually get a certificate as such?


----------



## venice

No problem. Yes, a green A4 size savings certificate with the relevant details.


----------



## slumdogz

I'm waiting since 6th dec for a saving cert.
Just got in on time thankfully.


----------



## TomPetty

Hi Guys, 
Yes - Its taking at least 6 weeks at the moment. Just received two of mine this morning, and I purchased them late Nov / early Dec. 

Be patient .. They will come ;-)


----------



## theresa1

Got a savings certificate dated 7th December 2012 this morning in the post.


----------



## Pinesky

I was on to them today , they were processing the work of Dec 7th today.
So bear with them for a while .


----------



## Sue Ellen

Pinesky said:


> I was on to them today , they were processing the work of Dec 7th today.
> So bear with them for a while .



Rang to-day because cert. still not received since early December.  Request for update of identification on way because they now require same to be updated every 2 years.


----------



## tiv

Was just reading back on these posts and read posts from Dec about rates dropping. Just wondering if they did drop since then or if still the same? Thanks


----------



## Sue Ellen

tiv said:


> Was just reading back on these posts and read posts from Dec about rates dropping. Just wondering if they did drop since then or if still the same? Thanks



The rates changed mid-Dec (16th I think).   See here for new rates.  Not sure if this info applies to all but definitely does to certificates.

Update:  Previous thread with details of reduction in rates here.


----------



## tiv

Thanks Sue, will take a look.


----------



## amadain

Pinesky said:


> I was on to them today , they were processing the work of Dec 7th today.
> So bear with them for a while .


 
The above post was from the 28th Jan so presume investment made on 15th December (just before the rate drop thankfully) will be processed very shortly ?


----------



## Palerider

You should have received confirmation by now, I invested Dec 15th as well and received paperwork about two / three weeks back...


----------



## samsamson

How do you guys feel about the 10 year bond?

I'm not sure if I can stomach any potential losses on the stock market and thought putting my money into the 10 year NSB could be a hassle-free way to hopefully beat inflation by a percent or two over the next 10 years.

Part of me would be tempted to start a new one every year and then not worry about it till the money rolls back in every year like clockwork down the line.


----------



## theresa1

It's a long time but I've started to stick in a few thousand every now and then - you get a card you can use each time in the post office so it's very handy.

I also have a 4 year bond. The five year cert you should check out first - 100% DIRT free.


----------



## The Ghoul

I have been buying 10 year bonds with every salary payment. Money goes into my current account and the same day I go to the post office with my debit/ATM card and state savings card. My debit card has a transaction limit of 1500 euro so that's the most I put in at a time. The process takes less than a minute if the post office is quiet. 

I'm up to about 8 or 9k total I think. I don't see myself holding more than 20 or 30k in 10 year bonds.


----------



## triggs

*prsi on savings bonds any resolution?*

an avid reader but infrequnt contributor would dearly love to know if prsi will apply to savings bonds and savings certs.I apologise if I have used the wrong thread.Have the powers that be decided on this yet?


----------



## theresa1

Simple answer - no the powers that be have not decided yet as far as i know. The Tax Free Products i.e. 3 year bonds,5 year certificates and 6 year Instalment savings would stand the better chance of having no prsi. Personally I hope the 4 year and 10 year bonds manage to escape prsi if other state savings Products escape it. Watch this space.


----------



## moonman

a friend of mine who lives in northern ireland asked me if this saving scheme would be available to him, he was born in dungannon and still lives near there. any help please, thanks.


----------



## theresa1

The Ghoul said:


> I have been buying 10 year bonds with every salary payment. Money goes into my current account and the same day I go to the post office with my debit/ATM card and state savings card. My debit card has a transaction limit of 1500 euro so that's the most I put in at a time. The process takes less than a minute if the post office is quiet.
> 
> I'm up to about 8 or 9k total I think. I don't see myself holding more than 20 or 30k in 10 year bonds.




- What do you think about the annual payment being dropped? Could it be a good thing?

- Any idea why after 2 issues they have gone back to 5.5 years from 5 years?


----------



## The Ghoul

theresa1 said:
			
		

> - What do you think about the annual payment being dropped? Could it be a good thing?
> 
> - Any idea why after 2 issues they have gone back to 5.5 years from 5 years?


I wonder if the dropping of the SB yearly interest for SB issue 4 is related to the introduction of PRSI on deposit interest? There was a fair amount of debate/uncertainty here about how this yearly interest would be treated for PRSI. Now, perhaps, things are simpler. Also, perhaps those who have issue 1,2 and 3 SBs will "get away" without paying PRSI on their 1% yearly interest.

This is just speculation and I could be completely wrong.

I don't know why the savings cert has changed back to 5.5 years. I also don't know why it changed from 5.5 years to 5 years for the previous two issues!

It's another blow for savers that the rates have dropped again and my prize bonds will be affected by this. However the positives I get from the cut are:

-it may be a good sign for the country that the NTMA is in a position to do this

-it makes me think that locking in before the recent rate cuts was a reasonable strategy. And that Jill Kerby was very wrong to say in 2011 that the NTMA state savings products were for "prize idiots".


----------



## Lightning

The Ghoul said:


> I wonder if the dropping of the SB yearly interest for SB issue 4 is related to the introduction of PRSI on deposit interest? There was a fair amount of debate/uncertainty here about how this yearly interest would be treated for PRSI. Now, perhaps, things are simpler. Also, perhaps those who have issue 1,2 and 3 SBs will "get away" without paying PRSI on their 1% yearly interest.



I concur that the removal of 'normal annual interest' is probably driven by the PRSI changes. 

With regard to the existing legacy products, we will have to wait and see what the Finance Act says about PRSI eligibility on the 'normal annual interest'.


----------



## theresa1

http://www.statesavings.ie/Downloads/NSBFAQs.pdf - FAQ still not updated for the 4 and 10 year bond.


----------



## theresa1

FAQ link has been pulled under "NSB Application Form" on main page of statesavings website. They need to hurry with update. Above link still take's you to issue 3.


----------



## theresa1

The FAQ for 4 and 10 year bonds seems to have been completely dropped - Prize Bonds still have a FAQ.


----------



## theresa1

"What if I have more questions?
Visit www.StateSavings.ie where you can read and print
a detailed Frequently Asked Questions booklet and the
Terms & Conditions. "

The above is from NTMA Brochure 3 but still no FAQ on the website.


----------



## theresa1

In the money section today in The Irish Mail on Sunday a reader asked a question about a Savings Cert maturing in 2015 and would the interest accrued be subject to PRSI.

The answer was No - 'free from all tax,levies and PRSI'. Is this correct?


----------



## theresa1

theresa1 said:


> In the money section today in The Irish Mail on Sunday a reader asked a question about a Savings Cert maturing in 2015 and would the interest accrued be subject to PRSI.
> 
> The answer was No - 'free from all tax,levies and PRSI'. Is this correct?




To answer my own question - yes.


----------



## Kimmagegirl

Must you return the interest received as income and can that in turn be taxed?


----------



## looteht

Hey,

After reading this thread I bought some prize bonds.
My bonds details arrived in the post today. I signed up to the prizebonds website and entered my range of bonds.

When I click on check prizes, it says I have won prized, some back in February.....
Whats the story with this. Have these numbers been sold and then bought by me?


----------



## theresa1

"On checking my recent statement dated 15/04/2015 I discovered that I did not receive a cheque for payment of Interest on a small 10 year bond."

I e-mailed state savings and to this day apart from a general acknowledgement I never received a reply. I also e-mailed on June 1st and got no reply.

As no joy with e-mail I decided to phone them on June 19 and was on the phone for 33 minutes getting passed around from billy to jack and then back to jack again but at least jack on the 2nd conversation actually found out who I needed to talk with and gave me a direct number.

I then phoned that person and thankfully got through and they had to send me out a form which i had to bring to my local post office to get witnessed with photo I.D.

I brought my passport and the girl in the post office who is always helpful photocopied my passport and attached the copy to the letter which I had filled out and sent back.

I got my "new" cheque in the post on July 7th. In hindsight I wish I had opted for interest payment to go directly in to my bank account.

However the level of customer service from state savings was shocking in my opinion and I hope to God that no more cheques go 'missing in the post' if indeed that is what happened.


----------



## Fella

I'm going to invest 120k in the state savings 10 year bond , the interest rate seems too high so looks like value to me to get in now. I was paying part of my mortgage down but at 1.1% I had a last look at the best buys thread (cheers Ciaran who updates it ) and I noticed 2.25% tax free and wonder how I missed it , so 120k now and in 10 years I'll have 30k (please god! )

So is it a case of just going to the bank and asking for a bank draft of 120k and go to post office and thats it obviously bring along ID etc. 
Thanks in advance


----------



## The Ghoul

Yes,  bank draft made out to yourself plus form, ID and recent proof of PPS number and address.
http://www.statesavings.ie/Downloads/NSBApForm.pdf

Unlike earlier issues of the NSB, the current issue doesn't pay yearly 1% interest into a separate linked account - so the process is simpler than it used to be.


----------



## Fella

The Ghoul said:


> Yes,  bank draft made out to yourself plus form, ID and recent proof of PPS number and address.
> http://www.statesavings.ie/Downloads/NSBApForm.pdf
> 
> Unlike earlier issues of the NSB, the current issue doesn't pay yearly 1% interest into a separate linked account - so the process is simpler than it used to be.



Thank you
Just been to the post office , I was advised there to get a bank draft made out to An Post , so I rang state savings to double check they said get a bank draft made out to NTMA state savings.


----------



## Sarenco

Fella said:


> I'm going to invest 120k in the state savings 10 year bond , the interest rate seems too high so looks like value to me to get in now. I was paying part of my mortgage down but at 1.1% I had a last look at the best buys thread (cheers Ciaran who updates it ) and I noticed 2.25% tax free and wonder how I missed it , so 120k now and in 10 years I'll have 30k (please god! )
> 
> So is it a case of just going to the bank and asking for a bank draft of 120k and go to post office and thats it obviously bring along ID etc.
> Thanks in advance


 

Just to note that a 10 year, tax free, rate of 2.25% may not look so good in 10 years time if interest rates rise appreciably over the term of the bond.  Don't forget that your rate is fixed for 10 years so you are taking on a considerable amount of duration risk.

The only interest rate that is appropriate to compare with a variable rate on a home loan (tracker or otherwise) is an instant access, sight deposit or a short term money market instrument. 

Comparing a variable rate to a (long-term) fixed rate is comparing apples to oranges.

Having said all that, I certainly agree that state savings certificates and bonds look like good value to me compared to other fixed interest investments with an equivalent term and credit profile.


----------



## Fella

Thanks Sarenco , this 10 year thing I don't like myself especially looking back at 2013 where it paid 47k tax free now its 25k I can't see much of an alternative I am worried about 120k been worth very little in 10 years time. 

Thanks


----------



## Sarenco

Hi Fella

Mo money, mo problems! 

I think your question may be somewhat off topic for this thread - would you mind posting it as a case study, following the prescribed format, and people can then pitch in with their suggestions?


----------



## settlement

When people speak of diversifying portfolios and having a certain proportion in bonds, do they mean bonds just like these?


----------



## The Ghoul

Bit of a change today - State Savings are sending out certificates for the National Solidarity Bond 10 year and 4 year. They are very similar to the certificates that are issued for savings certificates and savings bonds.

They are for issue 5 of the NSB only but going back to the start of issue 5 in Oct 2014. So if a person bought a NSB in Oct 2014 and didn't encash it, they will now receive a certificate for it.

As a result of this I received 18 letters with certs in today's post!

I wonder if there will be any changes to the NSB purchasing card or if a new issue with a lower interest rate is on the way  - hopefully not.


----------



## Gordon Gekko

I would have no qualms about 2.26% net for 10 years. The State raised 10 year money at 1.2% last week. That 1.2% is taxable, so you end up with less than 0.6% after tax. That's around a quarter of the return from the State Savings product. I also believe that interest rates will stay very low for a very long time, which mitigates the duration risk from my perspective.


----------



## dub_nerd

The other thing that mitigates duration risk is that you can get your money back anytime, with a hit to your return of course, which is tiered based on number of years before encashment. The AER at year 4 is already higher than the (new, as of February) Rabo Notice Saver rates net of DIRT (which is my personal benchmark rate). In the unlikely event that interest rates go up any time in the next several years, you can always bail and switch tack. A higher return would be nice -- having gotten used to the 4% return on 4 yr bond maturing soon -- but am feeling I might have to grin and bear it on the 10 yr bond before it too disappears.


----------



## theresa1

Got my seven letters The Ghoul, in the post the other day. I think they should have waited until issue 6 to introduce this.

NTMA sure know how to waste money on stationary, printing, cheques etc.


----------



## cbreeze

theresa1 said:


> Got my seven letters The Ghoul, in the post the other day. I think they should have waited until issue 6 to introduce this.
> 
> NTMA sure know how to waste money on stationary, printing, cheques etc.


I started buying 10 year NSBs in September and got a certificate for the first one, but nothing yet for the others I have bought since.  They might be aligning them with the 5 and a half year certs and three year bonds in that when they mature you will be sent a form and an envelope to do something when it matures.  At least they aren't sending out letters any more for individual certs and bonds


----------



## theresa1

When you purchase a new 4 or 10 year bond you still get an acknowledgement for each purchase.


----------



## ardmacha

Another successful bond sale today
http://www.independent.ie/business/irish/government-raises-750m-in-bond-auction-34708327.html

6 year bonds at 0.81% 

With a government now in place, a rate cut on State Savings might not be far away.


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## fayf

I'l be investing in the 10 year bond when some other policies mature shortly.

Yes, 10 years is a long time, so what i am going to do is make a few seperate purchases, maybe 4, so that it gives me the option of withdrawing one of those, without affecting the other 3,if i need some of the funds, which is very unlikely. The problem with investing say 100k in one bond, is that if your circumstances change in say 6 years time, you have to do a full withdrawal, and you loose the bulk of the interest. The product is structured in such a way that three quarters aporox of the 25% interest accrues in the last few years.
To be exact, 19% of the 25% total interest cumalates in the last 4 years, so the first 6 years only cumalates to 6%

So if you made 4 x 25k bond purchases now, and have to withdraw one of them,.in say 7 years time, you still have 75k which will remain until the full term. But if you only had one 100k bond, and need funds in 7 years time,you will loose the bulk of the interest, as you will have to make a full withdrawal of all 100k as the capital is all tied up into one bond.

I have had a good, and long look around, and for someone who won't risk their initial capital, and doesent need the funds for the forseeable future, there is nothing out there, that comes remotely close. Even if the government drop DIRT to 20%, they would still be way ahead.

All the indicators are for very low interest rates, for 5 years minimum, some analysts say a lot longer.

Even if this is wrong and they start increasing 5 years from now. The 10 year bond is pulling more than 4%, for each of the last 4 years. And no DIRT, and zero transaction charges.

Its a no brainer, and bear in mind, there is always the possibilty the rates will be reduced, so get in now, there is nothing to loose here.

I have also found many comparison sites misleading, as they usually quote Gross Interest before tax, so the comparators are showing the 10year bond at #1 or #2,but when you take the DIRT into account, you realise how far ahead this product is from the competition.


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## Lightning

Another lower yield today. 10 year bonds hit 0.77% today. 

Surely the NTMA, who say they base State Savings rates on bond yields and deposit rates, cannot justify paying 2.26% for too much longer.


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## fayf

Well spotted, the 10 year bond could be cut without notice, thats exactly what happened on each of the recent cuts. I got caught a few years back when i passed on the 5.5 year saving certs, paying 21%,as i was waiting to come out of a bank deposit 3 year deal, with the intention of t/f to 21% yielding saviblng certs when it matures, which i could have exited, i should have l, but did not. Lesson learned, it dropped from a cumalative 21% back in 2011, to just 7% now. Still though, i still have a 21% saving cert bond maturing in a few months, so i have no choice but to leave it there until full maturity.


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## theresa1

Rates may change on Sunday June 5th 2016 - just a guess as the Monday is a public holiday.


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## fayf

Is there a particular reason for that timeline, or, are rates reviewed at that time each year ?


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## Fella

Keep looking at this 10 year savings but somethings holding me back , 10 years without 100k it's a long time , could be some opportunities missed have to allow for that. I'm wondering would it be easier to manage 100k myself lending it out in small bits on peer to peer lending sites. Is it too simplistic to think if interest rates stay low equities are likely to rise ? 
Although state savings rate comparatively is great it's still not great if you get me , 100k now @35 , 125k @ 45 for me meh it's impossible to know what oppurtinities will arise . 
100k into a REIT or 100k into state savings ? What would you choose , I'm edging towards a REIT, even with no share price rise you'll do better in dividends if reinvesting I'd imagine .


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## fayf

Thats a fair point, it is very much an "age related" decision, and other personal circumstances, so it maybe not be suitable for you, but suits me better, probably because I am 47.


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## theresa1

"Is there a particular reason for that timeline, or, are rates reviewed at that time each year ?"

NTMA have reduceded rates before on bank holiday weekends - that's all I've got to go on, so purely speculative and I may well be wrong.


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## fayf

theresa1 said:


> "Is there a particular reason for that timeline, or, are rates reviewed at that time each year ?"
> 
> NTMA have reduceded rates before on bank holiday weekends - that's all I've got to go on, so purely speculative and I may well be wrong.



Thats more than I have. nice tip. Had planned on making a Post Office visit next week anyway.


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## alwaysonit

ardmacha said:


> Another successful bond sale today
> http://www.independent.ie/business/irish/government-raises-750m-in-bond-auction-34708327.html
> 
> 6 year bonds at 0.81%
> 
> With a government now in place, a rate cut on State Savings might not be far away.




Treating this as the rate the realistic rate (should we?) then it also makes 5.5 year certs at 1.24% good value?


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## Aruthur Bishop

Hi all

Been looking at the 10 year bond lately. Do people think the rate will change on this soon ?

Am i right in saying to get these i need to fill out the application form, wait for my identity to be confirmed..then go to a post office an open one?

Can i not just walk into a post office and as for a 10 year bond?


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## theresa1

Yes you can walk into a post office with your fully completed application form and necessary documentation e.g. driving licence or passport, utility bills etc. Post office clerk will even photo copy them for you and hand you your documents back. You will get a receipt for your purchase of the bond.


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## Mike

I invested in the 5.5 yr saving certificate in March, brought in all the necessary documentation which they photocopied etc. If I want to invest again in the 10 year do I need to bring all that in again. I vaguely remember them mentioning that from now on I would only need my customer number. Is this true?


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## tallpaul

Yes. Once you have one account number to put on the new form you are good to go. I have opened five 5.5yr saving certs over the past twelve months and I was in and out of the Post Office in five minutes.


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## Aruthur Bishop

This info is probably somewhere...but can they take laser ? or is it just a cheque ?


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## fayf

For any new purchases of state savings, you still have to bring in all these items every time you want to purchase these products.

Acceptable Payments Types:
Debit cards, Cash, Personal Cheque, but there may be a limit on your debit card.
I usually use a bank draft as I no longer have cheques, and conscious of the limits on debit cards, which vary considerably.

Cheques or bankdrafts must be made out to "NTMA State Savings".

ID Checks:

Photo ID - e.g. Drivers Licence or passport
Proof of Address - e.g. a untility bill in your name
Proof of PPS Number - e.g. tax credit list from revenue

Have the application form fully completed before you go up to the counter, if you don't you will be sent to the back of the line, like I was today !!

Application forms are downloadable here:
[broken link removed]


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## theresa1

I presume they are still sending out a Card when you purchase your first 4 or 10 year solidarity bond. This is all you need with your money for future purchases.


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## Aruthur Bishop

Thanks all given the current deposit rates im considering buying a number of 10 year bonds.


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## theresa1

theresa1 said:


> "Is there a particular reason for that timeline, or, are rates reviewed at that time each year ?"
> 
> NTMA have reduced rates before on bank holiday weekends - that's all I've got to go on, so purely speculative and I may well be wrong.



I wish I was wrong - had some money to invest and was thinking I should head up to the Post Office with a cheque and get a new 4 year bond yesterday - shrugged it off and said I'll go next Saturday - bit sick today and only myself to blame.


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## The Ghoul

theresa1 said:


> Rates may change on Sunday June 5th 2016 - just a guess as the Monday is a public holiday.


Good call!


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## fayf

I was lucky to get the 10 year bond at 25%, the week before rates were cut to 16%. it seems there is no end in sight, to interest rate reductions. It's hard to believe,that the 10 year bond was yielding 50%, just 3 years ago(with 4/5ths of that paid Dirt Free).


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## DLD

Could someone answer me a question I have regarding the 6yr ChildCar Plus account?

Basically at present we would like to open account for our 3 kids and have their child benefit paid into it.
I was reading the blurb for it, and it says that 12 months money is paid into it, which is then kept for another 5 years.

So is this account only available to store 1 years money? I want account where it continually rolls, with money going into every month for the foreseeable future.

Does this account not suit this purpose? Would I need to keep opening a new account every year and putting in another 12 months money?


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## boe

You don't need to open a new account every year. After the end of year one, the balance in the account is pushed off to another account where is stays for another 5 years. You'll end up with multiple accounts eventually but you get annual statements detailing the amounts in each.
At the end of the 6 years, you can re-invest in a bond or just withdraw it.


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## DLD

Yeah I understand that, but its obviously no good for continuous savings.
It will mean always opening a new account every year, which is far from convenient.


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## ariidae

DLD, they roll the accounts automatically. You don't have to open a new one every year - it automatically happens.


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## alwaysonit

From what I can gather, the 10 year Irish bonds are trading at just over 0.41% and 5 year bonds are trading at a negative rate.

Surely, if one can afford to lock the money away for this long, the current rate of 1.5% APR on 10 year bonds and 0.98% on 5 year certificates is a no-brainer for the safe part of my portfolio?


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## Lightning

The Irish 10 year bond is now yielding 0.33% today. Meanwhile, the NTMA pay retail State Savings investors 1.50% AER tax free for 10 years. Big difference between the largely institutional rate and the retail rate.


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## Marc

Ciaran it's a good point.

The difference is that in 2012 it was yielding over 12% and if you had purchased then you would now be sat on a substantial tax free capital gain as a private investor.

The bond market and state savings really are different things entirely.


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## louthguy

hi would you recommend to invest in the 10 year bond or which? I have money saved which im not sure what to do


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## Lightning

louthguy said:


> hi would you recommend to invest in the 10 year bond or which? I have money saved which im not sure what to do



Are you likely to need the money at any stage over the next 10 years?


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## louthguy

I have  a lot saved so can afford to put some away


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## quickinvestor

This thread seemed to die an awful debt. Maybe it was the new rate of 16 percent that changed people's opinion. I think people should remember that its still a really good investment considering the DIRT is paid at 33percent on deposits in banks. 

KBC only lets you save 3% for money up to 15 thousand.


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## Lightning

A few corrections ... 



quickinvestor said:


> DIRT is paid at 33percent on deposits in banks



DIRT is 39%. 



quickinvestor said:


> KBC only lets you save 3% for money up to 15 thousand.



Cap is 40,000 EUR. 



quickinvestor said:


> Maybe it was the new rate of 16 percent that changed people's opinion



Been a while since the NTMA have had 'new rates'. 16% is the gross rate for 10 years. 1.50% AER tax free is the comparable rate.


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## quickinvestor

CiaranT said:


> A few corrections ...
> 
> 
> 
> DIRT is 39%.
> 
> 
> 
> Cap is 40,000 EUR.
> 
> 
> 
> Been a while since the NTMA have had 'new rates'. 16% is the gross rate for 10 years. 1.50% AER tax free is the comparable rate.




few corrections for you

No, How is that gross? when there are no taxes on the state savings ?

Would it not be 1.6% per year ?


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## Lightning

1.60% AER tax free means 1.60% per year. 

The gross rate is the rate earned over the lifetime of the term deposit. 

Comparable rates are quoted on an annual basis.


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## Logo

theresa1 said:


> Rates may change on Sunday June 5th 2016 - just a guess as the Monday is a public
> 
> 
> 
> 
> 
> theresa1 said:
> 
> 
> 
> NTMA have reduceded rates before on bank holiday weekends - that's all I've got to go on, so purely speculative and I may well be wrong.
> 
> 
> 
> 
> Next Monday happens to be the June bank holiday...
Click to expand...


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## Lightning

Will be interesting to see if more cuts come on Sunday 4 June or if the NTMA wait until bank holiday weekends later in the year.


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## Lightning

The NTMA are now issuing 5 year debt at a negative rate. 

The gap between NTMA State Savings rates and both sovereign yields and deposit rates continues to grow.


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## Logo

theresa1 said:


> Rates may change on Sunday June 5th 2016 - just a guess as the Monday is a public holiday.



Is there any indication that rates might change on Sunday Aug 6th 2017 - as Monday is a public holiday?


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## Lightning

No indication other than State Savings rates are once again out of sync with deposit rates and sovereign yields.


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## settlement

Hi all,

What are current thoughts on state savings?

16% ten year return is pretty poor I think. Considering it was previously 45%. I presume when it says tax free, that means both dirt and cgt? In any case it's not overly enticing


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## noproblem

settlement said:


> Hi all,
> 
> What are current thoughts on state savings?
> 
> 16% ten year return is pretty poor I think. Considering it was previously 45%. I presume when it says tax free, that means both dirt and cgt? In any case it's not overly enticing



But it's guaranteed.


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## dub_nerd

settlement said:


> Hi all,
> 
> What are current thoughts on state savings?
> 
> 16% ten year return is pretty poor I think. Considering it was previously 45%. I presume when it says tax free, that means both dirt and cgt? In any case it's not overly enticing



"Pretty poor" is a relative term. It's pretty good compared to other risk free investments.


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## settlement

noproblem said:


> But it's guaranteed.



Yes, I know. But a guaranteed investment that will likely be outstripped by inflation is not much good in my eyes. I know the stock market is not guaranteed but it seems to me taking a 'risk' with it and getting an average return worth many times over this return is worth it for vast majority of people (excepting perhaps those near retirement).



dub_nerd said:


> "Pretty poor" is a relative term. It's pretty good compared to other risk free investments.



I suppose compared to other risk free investments in Ireland. But outside of Ireland it's common to have interest rates of 4% and higher without having to put away money without touching it and losing interest.


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## Sarenco

settlement said:


> I suppose compared to other risk free investments in Ireland. But outside of Ireland it's common to have interest rates of 4% and higher without having to put away money without touching it and losing interest.



Would you care to name these risk free investments that pay a coupon of 4%?  Are there investment costs involved and is the return tax free?

It sounds almost too good to be true...


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## noproblem

I'd love to know about a few of these as well.


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## dub_nerd

settlement said:


> ... a guaranteed investment that will likely be outstripped by inflation is not much good in my eyes.


When did risk free investments _ever_ pay higher than the rate of inflation? I'm no expert, but as far as I can see the gap between inflation and returns on deposits is smaller than it has been in many a year. I'm quite happy to have most of my money locked away safely and only being eroded by a fraction of a percent per annum. (Not as happy as I was between 2012 and 2016 when you could lock in deposit rates way above the rate of inflation, but that was a once off due to the banks being in a bad way and stuck for funds).


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## settlement

dub_nerd said:


> When did risk free investments _ever_ pay higher than the rate of inflation? I'm no expert, but as far as I can see the gap between inflation and returns on deposits is smaller than it has been in many a year. I'm quite happy to have most of my money locked away safely and only being eroded by a fraction of a percent per annum. (Not as happy as I was between 2012 and 2016 when you could lock in deposit rates way above the rate of inflation, but that was a once off due to the banks being in a bad way and stuck for funds).



I was getting 4.5% previously in Australia (in 2015) I believe. This outstrips inflation, even after tax. But I appreciate the sentiment.


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## noproblem

Settlement.
"But outside of Ireland it's common to have interest rates of 4% and higher without having to put away money without touching it and losing interest."

So, 2 years ago you were getting 4% in another continent.
Care to give us lesser informed mortals some details of the  statement above that  you made yesterday?


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## settlement

noproblem said:


> Settlement.
> "But outside of Ireland it's common to have interest rates of 4% and higher without having to put away money without touching it and losing interest."
> 
> So, 2 years ago you were getting 4% in another continent.



Yes, I was. It's a big world out there.


noproblem said:


> Care to give us lesser informed mortals some details of the  statement above that  you made yesterday?



I already did. If you have a question just ask it.


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## dub_nerd

settlement said:


> I was getting 4.5% previously in Australia (in 2015) I believe. This outstrips inflation, even after tax.



I think that's probably an outlier example. Australia temporarily has had reasonable economic growth without generating high inflation because of once-off structural shifts in the economy (see here). At the same time, fears over the booming housing market resulted in deposit requirements being raised for Australia's retail banks, leading to higher deposit rates.

Logically you would not normally expect deposit rates to be higher than the rate of inflation as it would siphon money out of the economy, away from productive uses. The best that savers can hope for is that the two are not so divergent that their money is eroded quickly. From what I can see (and as I said, I'm no expert) the difference between deposit rates and the headline rate of inflation is actually _lower_ in the current low interest rate environment than previously. This is what I think savers should be looking at, rather than being discouraged by nominally low interest rates.

Inflation can go to zero and negative, whereas -- as CiaranT suggested on another thread today (here) -- there tends to be some resistance to deposit rates going to zero.


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## settlement

dub_nerd said:


> I think that's probably an outlier example. Australia temporarily has had reasonable economic growth without generating high inflation because of once-off structural shifts in the economy (see here). At the same time, fears over the booming housing market resulted in deposit requirements being raised for Australia's retail banks, leading to higher deposit rates.
> 
> Logically you would not normally expect deposit rates to be higher than the rate of inflation as it would siphon money out of the economy, away from productive uses. The best that savers can hope for is that the two are not so divergent that their money is eroded quickly. From what I can see (and as I said, I'm no expert) the difference between deposit rates and the headline rate of inflation is actually _lower_ in the current low interest rate environment than previously. This is what I think savers should be looking at, rather than being discouraged by nominally low interest rates.
> 
> Inflation can go to zero and negative, whereas -- as CiaranT suggested on another thread today (here) -- there tends to be some resistance to deposit rates going to zero.



Good explanation. Thanks for that!

EDIT: in the context of downtrending rates, I wonder will there be a further decrease in the returns rate offered by NTMA.


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