Go on, give your savings the BOOST they deserve
…unless you want them battered by inf lation in a low-interest account
Who’s offering the best deal on our savings? Irish banks are finally passing on some of the recent hikes in eurozone interest rates to their savers. But only savvy savers who root out the best deals will really benefit.
Interest rates on accounts of two years have increased 2%, the latest Central Bank figures show.
Yet most savers don’t benefit because their money languishes in ‘on demand’ deposit accounts paying out a pittance.
Just two Irish deposit rates appear to have edged past 3%, according to the Competition and Consumer Protection Commission. Those are AIB’s two-year rate of 6.09% and PTSB’s 9.28% over three.
That’s not bad, though they still lag 0.5% behind the best eurozone rates that are available here via deposits site Raisin.ie.
And very few savers are getting anything close to PTSB’s and AIB’s 3% rate.
Most Irish money is ‘on demand’ in accounts paying just 0.13% on average.
‘Private households have over €153bn on deposit in Irish banks; 94% of that, more than €142bn, is in instant-access accounts. So getting the best instant rate is the most important consideration for most,’ says Mark Coan of Moneysherpa.ie
You don’t have to leave your money languishing on interest rates a smidgin above zero while paying off your mortgage at rates of 4%-7%.
There are plenty of better deals as our table (right) shows.
But which is the best one? Raisin.ie has the highest rates of up to 3.45% over just three months. This website offers access to banks within the eurozone, which means there’s no currency exchange risk and a €100,000 guarantee.
AIB (3.02%) and PTSB’s (3%) deals are the highest Irish rates on the market – but only if you can lock your money away for two years and three years respectively.
How much interest you earn depends on the extent to which you need access to your savings.
Most people seem to want money available ‘on demand’. But do they really need instant access to all of it, all of the time?
Most people, I imagine, just want the possibility of getting access to it in an emergency.
So consider the terms and conditions on savings accounts that may or may not suit you.
For example, you can’t get access to your money at all with AIB’s 3.02% two-year fixed deal.
With PTSB you can withdraw money – but at a price.
Bear in mind that you will be slapped with a withdrawal charge if you want to take it out before the full three years have elapsed.
BOND WITH AN POST?
An Post has a 10-year bond paying 2% a year. At first glance, it seems to pay out just two thirds of what AIB and PTSB offer – over what seems an onerous 10-year term. But this deal is far better and less restrictive than it looks.
Firstly, the rate is tax-free (thus avoiding 33% Dirt) so it’s really worth 3%, matching both banks, if you’re liable for Dirt.
Secondly, you can withdraw your money with only seven days’ notice – and even earn some interest on it, though at a much-reduced rate.
However, if you want the best of both worlds – decent interest rates and instant access to your money – Bunq seems hard to beat.
Mr Coan agrees: ‘Our recommendation for the best savings account overall is the Dutch bank Bunq. Bunq win out due to the combination of a competitive interest rate, instant access and easy sign up.
‘You can get 2.46% on your savings by signing up to Bunq. If you want to fix for longer for higher rates you can sign up to Raisin.ie.’
WHAT ELSE DO SAVERS NEED TO KNOW?
Deposit interest isn’t the only way to get a solid return on your savings. Consider these options:
■ Pay off your mortgage early and get an instant tax-free return of around 4%-5%.
■ Trade Republic is an investment platform that pays 4% for money you leave with it – with instant access any time (max €50,000). T&Cs on the website (traderepublic.com).
■ Investing is always an option though it’s risky. You can reduce the risk by putting your money into a cash or Government bonds fund. ■ Investing in your pension minimises risk further. Firstly, you can save 40% on tax. Your investment is also normally over such a long term that the investment market turmoil should smooth out, while there’s always the option of switching into safer funds.
CONSIDER DIRT
Inflation has also fallen sharply from 6.3% last August to 2.9% in March (using the Consumer Price Index metric).
With interest rates also rising sharply to 3% or more, the savings environment has improved a lot. However, you still need to work hard to beat inflation – after Dirt (Deposit Interest Retention Tax). Most Irish banks match inflation – after Dirt is deducted from your savings – so consider other options until they up their game.