Tuesday 16 January 2018

Some cracking deals available for savers building a nest egg

Banks are offering value in a bid for cash, writes Charlie Weston

THE recession has turn-ed us into a nation of savers. Those people lucky enough to sill have a job are saving hard. Around €12 of every €100 of disposable income is being squirreled away as households react to the downturn by swelling their savings accounts.

Deposit rates are not as attractive as they were this time last year but you can still get very attractive rates as banks and building societies are prepared to pay over the odds for cash, so desperate are they for funds.

Having a nest egg not only gives you peace of mind, but also gives you something to fall back on if the worst happens. Here are some tips to ensure you make your money work hard for you.

Scour the market

This advice goes for all financial products but banks and building societies make money because people do not follow it: shop around for the best interest rate.

Your own bank or building society may not necessarily be offering the best rate on your savings. Alternatively, if you really do not want to open a new account with a new bank, make sure there is not some other savings account you could have your money in within your bank that is offering more interest.

Also, banks and building societies have dev-eloped a nasty habit lately of offering attractive headline rates for a set period only. Once this period elapses the rate falls to a miserable level. Inertia then takes over as people fail to move their money on. Don't get caught on that one.

Make your current account work harder

All banks now offer free banking, although you may need to specifically request this from your bank. There is also the added bonus from a number of banks that pay interest on credit balances in your current account.

Your current account is an everyday transaction account into which most people have their wages paid.

The Halifax High Interest Current accounts pays 5.12pc on balances up to €1,500. But this only applies if at least €1,500 is credited to the account each month.

The amount of money you can earn on this account is not huge (because it is limited to balances up to €1,500) but it is far better than the situation as recently as 2004 when a Financial Regulator survey found annual current account charges varying between €50 and €137.

Permanent TSB pays current acc-ount interest of 2pc, but, again, you must lodge €1,500 a month.

If it is low or no transactions fees you want then it is hard to beat PostBank, the banking operation available through almost 1,000 post offices around the country.

Tax free

An Post offers a range of tax-free savings and investment acc-ounts. Savings bonds have to be held for three years but offer 3.23pc a year in interest, tax free, if held for that period. This means that an investment of €10,000 will grow to €11,000 after three years.

If you had to pay tax you would need a rate of 4.19pc to match this 3.23pc annual rate. These bonds are state guaranteed and there are no other charges. You can invest a minimum of €100 and a maximum of €120,000 for an individual.

If you are prepared to lock your money away for five-and-a-half years you will get an annual rate of 3.53pc from An Post for savings certificates. Again, there is no tax or charges.

However, if you need to take your money out of savings bonds or savings certs before the full term is up, the rate of interest you get will be far less.

Instant access

Despite the fact that European Central Bank rates are at a record low of 1pc, many banks and building societies are offering attract rates, even for demand deposit accounts. However, the catch is that these rates are liable to change at any time.

The best interest rate for an instant access account is offered by Irish Nationwide at 3.75pc. There is a minimum deposit of €1, with a maximum €20,000.

The Halifax Flexisaver pays 3.75pc on balances up to €10,000. But this is only for first 12 months. After that the rate falls to 2pc.

Nationwide UK (Ireland) is paying 3.3pc on its instant access account, while Anglo Irish Bank offers 3.1pc on balances from €1 up to €100,000.

Irish Independent

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