Wednesday 22 November 2017

What's the safest place on Earth to keep your money?

Fears over the break-up of the euro are not just a headache for big investors, but also worry many savers. In the first of a two-part series on safer investments, Louise McBride looks at how to set up sterling or dollar accounts

Photo: Getty Images
Photo: Getty Images

LAST week's Budget has left most people thousands of euro worse off, through a mixture of savage tax hikes, a reduction in the minimum wage, the abolishment of many tax reliefs, and cuts in child benefit, the dole and student grants.

Anyone who still has some money left over to save after the latest Budget could see almost a third of the interest earned on their savings gobbled up by savings tax. Brian Lenihan increased the amount of tax you pay on your savings interest (Dirt, aka Deposit Interest Retention Tax) from 25 to 27 per cent for ordinary deposit accounts, and to 30 per cent for long-term accounts.

The last few weeks have been among the most challenging the euro has ever seen. Concerns about debt problems in Ireland, Portugal and Spain have pushed the currency to record lows against the dollar and sterling.

Not only are people worried about the falling value of the euro, there are concerns about its break up -- with fears that a weaker common currency could be dished out to vulnerable debt-ridden countries like Ireland.

So is it time to hedge your currency bets by putting some or all of your savings into sterling or dollar deposit accounts -- or even into Swiss francs, Japanese yen or Swedish krona?

"If your assets and income are all euro-denominated, you are reasonably secure as you should be insulated from any devaluation of the euro," says Vincent Digby, founder of financial advisers Impartial, and a former head of funding with Bank of Ireland Global Markets. "It can, however, make sense for people to have assets that are non-euro denominated.

"You need to be certain of the charges on such accounts as there can be a lack of transparency in the exchange rate," he warns. "When a bank is converting your euro into another currency, be careful of bid/ offer spreads in currencies and any other margin costs -- particularly if you are putting large amounts of money on deposit. The same applies when you're coming out of the account and converting the non-euro currency back into euro.

"Remember, if you choose to open a non-euro deposit account, currencies can be volatile. I'd have a slight preference for sterling deposit accounts."

Although the wealth managers at Barclays Wealth believe the euro is not out of the woods just yet, they still don't envisage a break-up of the currency.

"Despite recent concerns about peripheral countries, the core European economies are in relatively good shape," says Pat McCormack, head of Barclays Wealth Ireland.

"We don't believe that there will be a break-up of the euro. If you've a lot of wealth, it's prudent to have some element of currency diversification -- perhaps about 10 to 20 per cent of your money in another currency.

"We are seeing quite of lot of interest in sterling and the US dollar. The United Kingdom is a market people know and understand. Recent economic data from the UK is positive. Other currencies of interest are the Swedish krona and Swiss franc."

Rory Gillen, founder of the investor website,, also believes that a break-up of the euro is unlikely. "The euro could remain a weak currency due to the cracks that have become apparent in the eurozone," says Gillen.

"I see debt restructurings within the eurozone, Greece and Ireland being a more likely outcome than a break-up of the euro. But who knows?

"In any event, investors are well used to currency diversification; it comes with the territory -- so why not depositors?"

Sunday Independent

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