Charlie Weston: Saving with An Post is a tax-free no-brainer
IF you have a few bob to invest or put on deposit and are being encouraged by your bank manager or financial adviser to put it into a tracker bond or some such account, ask them this simple question: "Where would you advise your mother to invest her money?"
The truth is that most of them would whisper to their mammies that An Post's savings bonds or certificates are an absolute no-brainer.
With An Post bonds, you get 3.23pc a year or 10pc over the three-year period of the bond. And that is tax-free.
Saving certs have to be held for five-and-a-half years and the annual rate works out at 3.53pc -- or 21pc over the full five-and-a-half years. Again, that is tax-free.
Remember that all deposit accounts are subject to DIRT (deposit interest retention tax) of 25pc unless you are over 65 and your income is less than €20,000 a year (€40,000 for a couple).
Income subjected to DIRT is not subjected to other tax, such as the income levy.
With a tracker bond, the gains will be taxed at 28pc. That means you would need a gross annual return of 4.3pc from a deposit account to match the return from An Post's bonds, because of the DIRT tax.
With a tracker bond, you would need to get an annual return of 4.6pc to match the An Bond return, because of the impact of the tax.
Furthermore, there is no penalty for exiting the An Post products. For savings certs, interest is calculated on a six-monthly basis and no interest is paid if they are encashed within six months of purchase.
For An Post bonds, interest is calculated on an annual basis and no interest is paid if they are encashed within the first year.
With many tracker bonds, it can be impossible to get out before the term is up.
Yes, there are good deposit rates out there, with Investec's online 3.6pc one-year fixed rate the best of the lot (there is a €20,000 minimum), but even this can't match the offering from the post office.
There is a maximum of €120,000 that can be put into the bonds and the certs at any one time and €240,000 for joint holdings. The minimum investment amount is €100 for bonds and €50 for savings certs.
And the bonds and certs are State-guaranteed.
Put €1,000 into a bond for three years and you will have €1,100 at the end of the term -- and you will not owe the Revenue anything.