Savings advice

Hi, My mother has asked me to put 30K in a savings account for her. She currently has this money in various accounts Rabo, Credit Union and PTSB. As she is 63 this year , I think puting in a savings account that gives her flexibility in when she decides she wants to use it is important.
I have looked at the Best Buys for Savings - I am thinking of putting in the Post Office Savings Bonds (3 year - 4.61%) as the rate of interest is good and also has the flexibility of taking of capital although will incur interest penalty. I am also considering PTSB as she already has partial money in this bank , for fixed term of 1 year and 4 months @3.99% - Its not clear to me why you would choose the fixed term account in PTSB when the regular savings account offers a 4% interest rate and imposes no restrictions on access to money - Is there something I am missing , does it make most sense to go with the regular PTSB savings account @4 %?
Thanks
Suzyann

If her income is below 18,000 (or 36,000 if married) she may be exempt from DIRT when she reaches 65. This can affect things - if she is exempt from DIRT, the An Post savings bonds/certs (which are already not subject to DIRT for anyone) become less attractive. The figure of 4.61% that you quote for the bond is a "grossed up" figure for comparison purposes. If someone is exempt from DIRT they should use the figure 3.23% instead and compare it with the gross AER interest figures from bank accounts.

Also, regular saver accounts can't really be compared with fixed term lump sum deposits. With the former you can only lodge a set amount every month. Unless there is some clever drip feeding strategy using multiple accounts that I'm not aware of, those with a lump sum are better off with a fixed term deposit even if the interest rate appears lower.

Lets say you have a 12,000 lump sum and attracted by a high interest rates of 4%, lodge it in instalments of 1000 per month into a regular saver account. At the end of the year you won't earn 4% on 12,000 though - you only earn 4% on the first instalment. On the second instalment you earn 11/12th of 4%. On the third 10/12th of 4%. And so on. At the end of the year you will have earned approx 2% on your 12,000.

thanks for the information - i wasn't aware that past the age of 65 you can be exempt from DIRT if your income is below a certain amount. While my mam does not work , my dad still does (he is also 63 this year) - he is not planning on taking early retirement and will be working for the next 2 years at least - salary would be slightly over the threshold so the incentive of no DIRT on the Post Office Bonds is worthwhile.
On the PTSB regular savings account , there does not appear to be any stipulation on when/ frequency you input your lodgement (adhoc lodgements are permitted) - what if she were to lodge the full 30K in the first installment - does that mean that she gets 4% interest per year which would be subject to DIRT?

suzyann said:

thanks for the information - i wasn't aware that past the age of 65 you can be exempt from DIRT if your income is below a certain amount. While my mam does not work , my dad still does (he is also 63 this year) - he is not planning on taking early retirement and will be working for the next 2 years at least - salary would be slightly over the threshold so the incentive of no DIRT on the Post Office Bonds is worthwhile.
On the PTSB regular savings account , there does not appear to be any stipulation on when/ frequency you input your lodgement (adhoc lodgements are permitted) - what if she were to lodge the full 30K in the first installment - does that mean that she gets 4% interest per year which would be subject to DIRT?

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You are misinterpreting the post above and the conditions. This is from the Best Buys thread on this forum, in relation to PTSB Regular Online savings Acc:
"Minimum per month: No mandatory minimum monthly lodgement requirement.
Maximum per month: €1,000 per month.
Access: Instant access.
Lodgement method: Ad-hoc lodgements at the customers discretion. No mandatory standing order requirement."

So, they won't let you lodge €30k upfront. Ad hoc lodgements would be to a maximum of €1,000.

Referring back to your original Post, you might be well advised to consider spreading the deposit across a number of institutions, e.g Rabo, KBC, Post Office etc, so as to minimise risk.

okay, thanks I understand now.

I think I will put 10k in PTSB for 14 months fixed term and the remaining 20K in Post Office 3 year bond account .