CHECKLIST BEFORE YOU JUMP FROM DEPOSIT

÷ CHECK CHARGES Know the total fees you will pay on any investment you are putting your money into — and how those fees will eat into your expected investment return.“If a fund is expected to achieve growth of 3.5pc a year yet the total fee is 2.5pc — which is the case with some products, it is unlikely that you will do well on the deal,” said Paddy Delaney of Informed Decisions. Check if the fund you are considering putting your savings into is managed by an external fund manager — if so, it is likely to carry a higher fund management charge than normal. Check the allocation rate too as this will determine how much of your savings are actually invested in the product. Aim for a product where you get 100pc allocation as this means the full amount you save into the product is invested — rather than you losing a percentage of your savings to charges. “Be aware that a 1pc government levy applies to all life company savings though,” said Nick Charalambous of Alpha Wealth. ÷ KNOW YOUR TAX Don’t overlook the impact of tax on your investment return. With ordinary deposit accounts, you must pay 37pc Dirt (Deposit Interest Retention Tax). You must usually pay an exit tax of 41pc on life assurance savings plans and other investment products. You must also pay a life assurance levy of 1pc on life assurance policies and savings plans. With some investment products, the investment return is liable to Capital Gains Tax (CGT) and this can make the product more tax-efficient than others. ÷ HAVE A RESERVE It is always wise to have a certain amount of money on deposit so you can access it if needed — even if the interest earned is low. Delaney recommends having between six and 12 months’ household expenses on deposit — with any excess earmarked for deposit alternatives. ÷ BUYER BEWARE Many new products have popped up in recent years as companies try to win over savers. Some of the deposit alternatives being offered however are very expensive and risky — so understand exactly what you’re getting into before investing in a product. Be particularly careful with structured deposits such as tracker bonds and credit-linked bonds. “There is a resurgence of investment products which are commonly referred to as tracker bonds,” said Delaney. “These complex products often promise a certain percentage of market returns, with a capital protection at a certain date in the future. Investors need to ensure they are familiar with the workings of such options as the return the investor receives can often be a fraction of what the market actually delivers, the fees can be astronomical, and the investor can suffer a large opportunity cost at the end of the day.” ÷ KNOW THE RISK Be comfortable with, and understand, the risk you’re taking on. With investment products, there is usually a chance that you could lose some or all of your money. “Have your attitude to risk assessed [when choosing an investment] and consider the time frame of your investments,” said Jim Hegarty of Hegarty Financial Management. “Only consider regulated products.”