Savings

tmac10us

Hi All,

I was thinking of saving some money long term, approx 10 years to help to pay off my negative equity mortgage. I was looking at the National Solidarity Bond or an Post Savings Certificates. Anyone any advise as to which is better or any other suggestions..

Ogham

tmac10us wrote: »

Hi All,

I was thinking of saving some money long term, approx 10 years to help to pay off my negative equity mortgage. I was looking at the National Solidarity Bond or an Post Savings Certificates. Anyone any advise as to which is better or any other suggestions..

That Solidarity Bond works out at 4.14% a year (3.96 after tax) ( see http://www.moneyguideireland.com/national-solidarity-bond.html)

With interest rates possibly rising soon - that rate doesn't look great for the 10 year commitment. Also - it's really for lump sums - not regular savings of small amounts.
You might be better off with one of the Regular Saver accounts
- some pay 4% (2.92% after tax) - with instant access.
Once you have built up a bit of a lump sum - you should think about paying it into your mortgage - say once or twice a year. (Especially if the mortgage rate is more than the rate on your savings after tax ). Check with your mortgage provider about the best way to do this.

Black Rock

The NTMA State Savings products net after tax rates are as follows

NTMA State Savings …………………......AER........RETURN
3 year Savings Bonds ……………….........…..3.23% ....10.00%
4 year National Solidarity Bonds ……........3.31% ....13.92%
5 ½ year Savings Certificates…………......…3.53% ....21.00%
10 year National Solidarity Bonds…......….3.95% ....47.30%

Your money is not locked away as you can have it all back (and any interest due) on demand at any time - repayment takes a maximum of 7 days.

Given the favourable low tax / no tax advantage of the NTMA State Savings products you need to divide these figures by 73 and multiply by 100 (grossing up for 27% DIRT) to provide the grossed up rates for comparison with other savings products which are subject to DIRT at 27% - the grossed up rates for comparison are as follows -
GROSS
RETURN/AER - NTMA State Savings ……………………......AER........RETURN
13.70%...4.42%...3 year Savings Bonds ………………....…..3.23% ....10.00%
19.07%...4.53%...4 year National Solidarity Bonds ……..3.31% ....13.92%
28.77%...4.84%...5 ½ year Savings Certificates……………3.53% ....21.00%
64.79%...5.41%...10 year National Solidarity Bonds…….3.95% ....47.30%


Full details in NTMA Brochure 2 – NTMA State Savings ™ Summary of Products available on the StateSavings ie website

Ogham

Black Rock wrote: »

Your money is not locked away as you can have it all back (and any interest due) on demand at any time - repayment takes a maximum of 7 days.

I haven't checked them all yet - but that is not true for the 10 yr National Solidarity Bond. You have to keep all the money in for the full 10 years to get the full interest and bonus. If you withdraw early you will get a much lower rate of return than the rates shown above.
If you encash your 10 year National Solidarity Bond before the end of the 5th year you will not qualify for any tax free bonus. All you would get is 1% per full year

Black Rock

NTMA State Savings products – table of rates that will be paid if cashed in early
All products are available at 7 days notice and will payout whatever interest is due at that time. Some such as the National Solidarity are weighted to incentivise savers to leave their money for longer. This table shows what interest rate you can expect from each of the products if you need to cash them in early before their final maturity date.

Table 1 - For comparison the following is the “Grossed Up Rate”(explained below)

AER (Annual Equivalent Rate)
End .......10 Year......5 ½ Year.....4 Year........3 Year
Year.......National.....Savings.......National......Savings
.............Solidarity....Certificate...Solidarity.....Bond
END.......Bond...........................Bond
YEAR__________________________________
1.......... 1.00%........2.88%........1.00%........3.01%
2.......... 1.00%........3.11%........1.00%........3.52%
3.......... 1.00%........3.56%........1.00%........4.42%
4.......... 1.00%........4.00%........4.53%
5.......... 3.55%........4.49%
5½....... 0.00%........4.84%
6.......... 3.10%
7.......... 4.78%
8.......... 4.27%
9.......... 3.88%
10........ 5.41%
“Grossed Up Rate” - given the favourable tax treatment of NTMA State Savings™ products, when drawing up comparative rates tables, for accuracy, it is grossed up rates that are needed for comparison with other products offered by financial institutions, which are subject to DIRT at 27% on the full amount of the interest paid. The grossed up rate is calculated by taking the net after tax rate that is actually paid out by the NTMA (as shown in table below) and dividing that figure by 73 and multiplying by 100 (this provides for the 27% DIRT rate).


Table 2 - This is actual net return actually paid out by NTMA after tax / tax free

AER (Annual Equivalent Rate)
End .......10 Year......5 ½ Year.....4 Year........3 Year
Year.......National.....Savings.......National......Savings
.............Solidarity....Certificate...Solidarity.....Bond
END.......Bond...........................Bond
YEAR__________________________________
1.......... 0.73%........2.10%........0.73%........2.20%
2.......... 0.73%........2.27%........0.73%........2.57%
3.......... 0.73%........2.60%........0.73%........3.23%
4.......... 0.73%........2.92%........3.31%
5.......... 2.59%........3.28%
5½....... 0.00%........3.53%
6.......... 2.26%
7.......... 3.49%
8.......... 3.12%
9.......... 2.83%
10........ 3.95%