Safe in the Post Office.

Good morning,

I'm looking for some advice that I could give to my parents.

Both are retired and currently have their life savings (bar Pension) in the Post Office in Saving Certs & Saving Bonds.
While these provide a good return (tax free) as depositis go, I'm getting a bit nervous for them.

My understanding is that all the money in the Post Office is backed up by the Irish State. However my concern is if the Irish State goes bankrup, what happens to their money?
Could that wipe out their life savings???

Would they be better off spreading the risk a bit i.e. move some money into English / Dutch banks i.e Ulster Bank / Rabo etc.

They don't really use the Internet so won't lodge their money in any bank where they can't walk in/out of...

Any advice woulds be much appericated.

Before the Irish State would decrare itself bankrupt they would probably try to tax or levy all taxpayers savings ... this would include any funds held overseas or in foreign banks by Irish tax residents, so moving funds overseas might be a futile exercise unless your are moving cash into an account in a third party name (Non Resident third Party).

The Irish State owes about €11bn in Post Office savings. Doctor Morgan Doom says the Irish state is heading for a €250bn debt and will need to default. I would think that the €11bn in PO savings would be the last thing they would default on.

Safe from default IMHO.

In fact most commentators (even the doomsayers) say there won't actually be a default just that the big boys will be asked to wait a tad longer to get repaid. This is called restructuring. Can't see them restructuring PO savings. The gains would be negligible compared to the very negative political fall out; remember when they tried to remove the medical cards?

Safe from restructuring IMHO.

Next possiblilty is an exit from the euro. I personally think this is impossible from a logistic, political and economic perspective but in the very unlikley event of a reintroduction of Irish Punts I suppose PO savings would be converted to Irish Punts with an expected devaluation.

Safe from devaluation IMHO.

Last possibility is a general levy on savings and here I agree with BillyRay, all savings of Irish residents would be vulnerable though of course with PO savings there is less chance of hiding them

Maybe I’m a bit thick but I cannot follow Duke of Marmalade’s logic. If the Irish state goes bankrupt, as looks very possible if it continues to pay off European bank’s gambling debts, surely it won’t have the money to pay holders of An Post saving bonds & certs.

My wife & I already hold €31,000 in An Post bonds & certs. Tomorrow I receive €11,000 from a Commodities Bond that has just matured. Until recently I thought An Post would be the safest and best place to put it. Surely, in the present climate, it doesn’t make sense to put all my eggs in the one basket. I would feel much safer investing in German, French or UK state bonds. If the Euro zone splits into a two tier Euro, German or French bonds would be likely to be worth more than Irish bonds.

Can anybody comment on the pros & cons of investing in overseas state bonds?

Are they guaranteed?
How does their after tax interest/return compare to An Post?
How do I go about it?
Where can I find the best value?

cautious said:

Maybe I’m a bit thick but I cannot follow Duke of Marmalade’s logic.

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Doctor Morgan Doom's solution envisages us cutting our debts to €110Bn which even he claims would be very manageable. PO Savings amount to €11Bn. It would be a bad day indeed if the government wasn't able to pay back that sum. My point is that PO Savings will always get priority from a purely political point of view.

With the risk of pointing out the obvious here ... So-called "An Post Savings" are really NTMA deposits that are invested directly in the Irish national debt. There is obviously major risk with this product right now.

CiaranT said:

With the risk of pointing out the obvious here ... So-called "An Post Savings" are really NTMA deposits that are invested directly in the Irish national debt. There is obviously major risk with this product right now.

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That sounds all very knowledgable but WADR is irrelevant.

If it comes the time that the government finds that it is unable to pay back €250bn debt in accordance with the original terms they will have huge scope in just who and how they will restructure/default. For example, everyone assumes, possibly correctly, that deposit guarantees would be way down the firing line. Foreign bondholders would of course be in the front line. I would suggest that €11bn PO Savings would be even further down than the deposit guarantees.

Duke I hope you're analysis is correct. But will the government have that level of control in how the restructuring takes place, or will it be designed by outside forces?
If the state is in control they need to give some assurance NOW to depositors that their savings are safe.

I was able to obtain a news report from six months ahead which ,in summary,states

Followng the 30% devaluation of the euro in Ireland and the other affected states,the Irish govnt has imposed a 30% emergency tax on all monies held by irish citizens abroad.
Govnt spokesman Mr X said that those affected would not really suffer any loss as ,effectively, their money would be worth exactly the same as if they had not speculated , which speculation did little to help the Irish economy. That is, those who put their money abroad will find it is worth exactly the sasme as if they had kept it in ireland.
As Mr X said "It would have been ridiculous if we had allowed this continuous outflow of money from Ireland at a time when Ireland is at its lowest ebb. All we are doing is ensuring that those who have kept their money here will be assured that their money is worth no less than that of panicking speculators. Indeed, many are saying that we should have penalised those speculators more than at the level of depreciation"

Mr X further added that if anyone has lodged money in overseas accounts and these accounts had not been declared then the total deposits would be forfeit , and there may be further action taken against citizens secretly lodging money abroad.
This has been agreed with banks throughout Europe to stop constant negative speculation.
All banks in Europe, USA and worldwide have agreed to advise governments of their citizens accounts - something that has been going on for a number of years.

I'll try to get more advanced reports from the future about results of panic-induced speculation and the results thereof.

kdoc said:

Duke I hope you're analysis is correct. But will the government have that level of control in how the restructuring takes place, or will it be designed by outside forces?
If the state is in control they need to give some assurance NOW to depositors that their savings are safe.

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This is a very good point. Under a unilateral approach the State would have full control. More likely any restructuring will be done in co-operation with the EU. This may restrict the degree of discretion of the State as to who it targets. I still think that even the big bad ECB has a soft spot for widows and orphans.

As to your second point, also well made, a statement now that there will be preferential treatmnet of creditors would go down like a lead balloon with the markets and the ECB. For a start there can be no admission by the State that any default is on the cards.

Oldnick. I told you so. That is exactly what I said would happen and your foresight has confirmed my assertion.

does anyone have an answers to the questions posted by "cautious" above regarding buying governments bonds?? or is there a link out there on this?

oldnick said:

That is, those who put their money abroad will find it is worth exactly the same as if they had kept it in Ireland.
As Mr X said "It would have been ridiculous if we had allowed this continuous outflow of money from Ireland at a time when Ireland is at its lowest ebb. All we are doing is ensuring that those who have kept their money here will be assured that their money is worth no less than that of panicking speculators. Indeed, many are saying that we should have penalised those speculators more than at the level of depreciation"

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I think at that point it would be time for myself and my family to move to either the UK or Norn Ireland,there would be little point hanging around as the State cannibalises the savings and assets of its citizens.

I think oldnick might be right, so unless you are moving residence you are unnessicarily taking on exhange rate risk (which may have cost you upwards of 10% to date) while they could still haul in all irish residents into it.

Of course default/restructuring is a very different thing than punt nua which seems to be lost in the scaremongering.

"As to your second point, also well made, a statement now that there will be preferential treatmnet of creditors would go down like a lead balloon with the markets and the ECB. For a start there can be no admission by the State that any default is on the cards".

Duke, following the government's raid on the pension funds, I heard Dan O'Brien suggesting on Pat Kenny's radio programme this morning that the government should make a statement regarding the safety of deposits.

cautious said:

Surely, in the present climate, it doesn’t make sense to put all my eggs in the one basket.

Can anybody comment on the pros & cons of investing in overseas state bonds?

Are they guaranteed?
How does their after tax interest/return compare to An Post?
How do I go about it?
Where can I find the best value?

Click to expand...

Any help or directions, anybody.
I'm beginning to think this is frowned upon as a heinous unpatriotic crime.

There is no such thing as "PO Savings" only "NTMA State Savings"

There is no such thing as "PO Savings" only "State Savings"- if you check the published annual accounts of the post office (An Post) you will notice there is no statistics on "Post Office Savings" at all. Savings Bonds do not form any part of the financial statements of An Post. Savings Bonds are accounted for only in the annual accounts of the National Treasury Management Agency (NTMA) and are identified as being part of the national debt.

The reason for this is that the post office simply provide a counter service to collect savings money on behalf of the Government and the post office immediately, every day, hand all savings money over to the Government under the management of the National Treasury Management Agency where it is known as "NTMA State Savings" which includes Prize Bonds.

All NTMA State Savings are managed by the NTMA and form an integral part of the Irish Government's debt otherwise known as the "national debt" or "Sovereign debt of Ireland". The NTMA's website StateSavings dot ie has a brochure on the home page which explains everything and lists the products which include Savings Bonds, Savings Cetificates, Instalment Savings, Deposit Accounts (such as the Ordinary Deposit Account and the Deposit Account Plus) National Soldidarity Bond and Prize Bonds.