An Post Saving Certs or Bank Deposit Acc

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Happy Girl

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Have 20k to invest long term (5+yrs) and want security. Just want to check I am calculating this correctly:

20,000 deposit - AN POST
21% over term of savings certs = 4,410 (no dirt payable)
20k after 5 & half years = 24,410

20,000 - BANK (averaging 4%p.a. for similar 5 & half yr period
4% p.a. over 5 and half yrs = 4,400 (less 21% dirt tax [924]) = 3,476
20k after 5 and half years = 23,476

Am I correct in my calculations of the above and am I reading it correctly that I would be better off financially to tie my money up with An Post for the five & a half year period rather than any of the banks which all average about 4% p.a. on deposits over this period of time.
 
I get 23,411.47 for 20,000 earning 4% over 5 years.

I assumed:
  • 20k invested on 1 January
  • interest paid annually (once a year on the 31st of December)
  • DIRT remains a constant 20% over the 5 years
  • interest remains in the account
  • interest rate remains 4% for the full 5 years
20,000 over the first year earns 800, deduct 160 DIRT => 20,640 in the account at start of the 2nd year.

this earns 825.60 gross. Deduct 20% dirt => 21,300.48 in the account at start of the 3rd year.

this earns 852.02 gross. Deduct 20% dirt => 21,952.10 in the account at start of the 4th year.

this earns 879.28 gross. Deduct 20% dirt => 22,685.53 in the account at start of the 5th year.

this earns 907.42 gross. Deduct 20% dirt => 23,411.47 in the account at end of the 5th year.
 
Both wrong - 4% is 3.2% after DIRT. Compounded over 5 and a half years that's 3,783. Savings certs pay 4,200. Still 11% better.

A few further thoughts

The savings certs have a State guarantee, although at 20K you would have similar security up to 90% of your deposit with a bank.

Banks are paying more than 4%, some as much as 5% albeit not as far as I am aware on long term deposits.

On early exit from the savings certs your interest rate is considerably cut back.
 
Harchibald said:
A few further thoughts
The savings certs have a State guarantee, although at 20K you would have similar security up to 90% of your deposit with a bank.
Banks are paying more than 4%, some as much as 5% albeit not as far as I am aware on long term deposits.
On early exit from the savings certs your interest rate is considerably cut back.
Click to expand...

I take your very valid points but my reason for investing this 20k is to diversify and am already with First Active/Irish Nationwide/BoI. Don't fancy going back down the route of internet accounts (closed my Anglo Irish Regular Saver recently). Just feel a bit too jittery with these accounts in the current climate. Trying to ascertain what my best alternative options might be. All opinions much appreciated.
 
Hi, I would do 10K in Anglo-IB instant access (4.5% per annum) + 10K in NR (5%) in order to spread the risk. And assuming that the rate won't go down you'd beat the post's proposal. Benefit: you can access the capital anytime and you won't lock it ... Only risk: if one of the 2 breaks down you would lose max 10% of the capital as per irish deposit protection rule. But I think that if it happens then it would be the end of the world...
 
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