Saturday 21 October 2017

Savers offered four-year bond as Government seeks to raise extra funds

Charlie Weston Personal Finance Editor

SAVERS will now have the option of buying a four-year National Solidarity Bond in a post office in a move that will help the State meet its funding requirements.

The National Treasury Management Agency (NTMA) said yesterday the new bond would pay a gross return over four years of 15pc.

This works out at an annualised rate of 3.56pc before tax.

The net return after deposit interest retention tax (DIRT) will be 13.92pc, or 3.31pc on an annualised basis.

Like its 10-year counterpart, which was launched last year, there are no fees, charges or sales commissions and savers can have their money back at any time. But savers will have to keep their money invested for four years to benefit from the full interest rate.

This is because the bond is structured so that it pays 1pc interest a year, which is taxed, and a bonus of 11pc at the end if the bond is held for the full four years.

Couple

The minimum investment is €100, and the maximum for an individual is €250,000, and €500,000 for a couple.

Actuary Tony Gilhawley, of Technical Guidance, said the new four-year bond had only a marginally better interest rate than those available from savings certs, also sold by An Post.

However, the savings certs pay a better rate if the money is withdrawn after the first, second or third year.

"To me, the extra return of national solidarity bond over four years of 3.3pc compared with 2.92pc for savings certs is not worth the better return the savings certs offer if you cash in earlier than four years," he said.

The new bond complements the 10-year national solidarity bond which has proven a success with savers since its launch in May 2010. To date, some €375m has been invested in the 10-year bond by 18,000 customers.

Irish Independent

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