Grossed Up State Savings Rates - Comparable Tax Rate

L

Lightning

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I'm trying to work out the updated grossed up comparable State Savings rates in light of the DIRT changes.

The DIRT rate is currently 41%.
The DIRT rate for 2017 will be 39%.
The DIRT rate for 2018 has been pre-announced at 37%.
The DIRT rate for 2019 has been pre-announced at 35%.
The DIRT rate for 2020 has been pre-announced at 33%.
(A small number of people pay PRSI on top of DIRT if they have unearned income of 5K+ per year).

What is the correct tax rate to calculate grossed up State Savings rates against? i.e. What would a normal deposit account need to be paying to match State Savings rates?

Most normal term deposit accounts pay interest on maturity date.

Hence, would I would think that:
The 3 year rate should be compared to a tax rate of 35%. Meaning a grossed up rate of aprox. 0.51%.
The 4 year rate should be compared to a tax rate of 33%. Meaning a grossed up rate of aprox. 0.75%.
The 5 year rate should be compared to a tax rate of 33%. Meaning a grossed up rate of aprox. 1.46%.
The 10 year rate should be compared to a tax rate of 33%. Meaning a grossed up rate of aprox. 2.24%.

Any thoughts on the above approach?
 
Hi Ciaran

I think that looks like a sensible approach.

However, I think it would be helpful if you could continue to also give a grossed up rate that is inclusive of PRSI - I wouldn't be so sure that it's only a small number of people that have to pay PRSI on top of DIRT.
 
Hi Ciaran

The anticipated DIRT change for 2018 doesn't appear to have materialised today, which I guess mucks up your grossed up rates for State Savings products in the "Best Buys" section.

Maybe it makes sense to wait to see if the pre-announced change makes it into the Finance Bill?
 
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