Large Sum Short Time

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jamiehalllola

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I have approximately 900k sitting in my AIB deposit account in anticipation of buying a house early in the new year. This acc is only paying 0.75% PA. What’s the best short term option. Is it risky to throw it all into a Lightyear savings account. Rate is good and instant access but 20k deposit guarantee would give you the fear. That said banks only guarantee 100k. Any thoughts greatly appreciated.
 
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jamiehalllola said:
That said banks only guarantee 100k.
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In your case the temporary high balance cover may apply:

Calculation of Compensation

www.depositguarantee.ie www.depositguarantee.ie
Temporary High Balances

The maximum amount of compensation payable by the DGS is €100,000 per person per credit institution. In addition certain deposits, known as temporary high balances may qualify for compensation in excess of €100,000. For a deposit to qualify as a temporary high balance it must stem from at least one of the following:
  • deposits relating to real estate transactions for private residential property i.e. deposits lodged in preparation for purchase, sale proceeds and proceeds of equity release
  • ...
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Spread the deposit among many diff irish banks,granted 9 banks is a lot!

Consider trade Republic/european banks also to make up the 9 banks. Lightyear is fairly pointless for you at only 20k protected
 
Short term Government Bond with 3-6 months maturity. Invest via stockbroker or one of the online platforms.

Should receive 3%+ on an annualized basis but not sure of tax treatment or fees.
 
As Clubman indicates the full 900k is probably covered for 6 months post house sale.

In terms of maximising your return on the 900k, it all depends on how much hassle you are willing to endure with account openings.

Obvious options for the 900k include:
- Lightyear (20k @3.25% or perhaps more depending on your risk tolerance with unprotected deposits).
- Trade Republic (50k @4.00%)
- BFF (100k @3.25% into a 3 month term deposit)
- Advanzia Bank (100k @3.86% for 3 months).
- Money market fund (such as CHS2 via Trading212 with a circa 3.85% return but 41% tax and no capital protection).
- Drip feed your AIB current account balance into 4 AIB Online Regular Saver accounts @1k*4 per month @3.00%.
- Drip feed your AIB current account balance into a BOI Super Saver @2.5k per month @3.00%.
- Drip feed your AIB current account balance into 3 PTSB regular saver accounts (1 Online Regular Saver and 2 21 Day Notice Regular Saver accounts) @2.50%.
 
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Splitting the money up is probably a sensible idea from the perspective of deposit safety anyway. I'd rather be chasing 100k from one bank DGS rather than 900k from the same bank, should the worst happen!
 
Chances are if it ends up that you're chasing €100k with one bank then you'll be chasing more with others too!
 
Or select an AAA rated Money Market Fund, which offers full liquidity and returns after all fees etc are above 3%. Tax will be at Exit tax at 41% versus DIRT but you are still much better off. After 6 months on €900k after tax you will have earned an additional €5,700 on the €900k. Better in your pocket that the banks, and with a new house an extra €5.7k will always find a use. We have a briefing note re these options please PM me if you want a copy emailed to you.

Regards Vincent
 
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