Stash the Cash

Thread to discuss best safe haven strategies for deposits/savings…

Couple of Questions:

  1. What happens to my PRSA if the bank that manages my PRSA goes to the wall?
  2. What protection is available for saving/deposits in your local credit union?
  3. Deposits with Northern Rock. I recently opened an account with NR. I transferred money into my account via an AIB account (based on the sort code). Are NR deposits held in AIB?

Would like to get a staw pole from pinsters on best safe havens for savings/deposits.

An Post/Northern Rock.

Good questions there

  1. Don’t know. Sorry
  2. I believe there is none!!! Or at least none guaranteed by the state. The CUs have their own fund AFAIK, but not sure how much it would cover in a real catastrophe. Add to that the fact that not all individual CUs are members of the national body (again, not sure what it’s called)
  3. Good question. NR use AIB to receive cash that is destined for Irish NR accounts. No idea of how often (or even if) they are then transferred out of AIB.

I still think NR are a reasonably safe bet, being guaranteed by the British government. However keep an eye on any expiry of that guarantee. I think they have committed to giving 60 or 90 days notice of expiry of guarantee. More likely is that they may be forced to drop the interest rates they are offering as it is essentially state aid and many other banks in the UK are objecting to this.

But I wouldn’t put all my money in one place. Rabo look very safe and have reasonable rates. I believe they’re the only bank with AAA rating in Ireland (though you need to treat ratings with a bit of scepticism too). You’re covered to about 95% of €40,000 under the Dutch compensation scheme.

Another poster mentioned National Irish Bank on a previous thread today. They’re covered by the Danish scheme which covers 100% of approx €40,000 (depending on exchange rate with Danish Kronen). Had a quick look on their website and they seem to be offering 4%. Not sure of their rating. Their website doesn’t give much info on T&Cs, or costs or whatever.

I would recommend checking out the best buys thread on AAM in the savings section.

Personally I’m toying with the idea of putting some money in an account in the Eurozone but outside of Ireland. One of the large German banks perhaps. But I haven’t found any such banks that offer non-resident accounts. And I would also have to file a tax return, which is a bit of a headache.

Green Bear has advocated having a stragety for withdrawing money in the event there is a problem with your main bank. So something like NIB may be attractive as they have branches and you can (presumably - to be checked) walk in and withdraw cash from your savings account.

Yeah, but if you google “National Irish Bank”, no. 3 on the list is an article from the Daily Telegraph: “Irish Bank fined £42m for tax evasion.”

Oh and FF’s Beverley Cooper Flynn was financial advisor around this time. A jury held that she encouraged a number of people to evade tax by ignoring the 1993 tax amnesty, while she worked as a financial advisor with National Irish Bank.

Apart from the fact that it’s changed ownership in the intervening period how is that relevant to the discussion?

Even if it is relevant, show me a bank that was operating in Ireland at the time that was fully DIRT compliant?

I have a NR account also, AFAIK they just use the AIB account to accept funds from other Irish Banks and the money is then transferred on the UK and managed from there.

We have the proceeds of our house sale deposited with NR on the basis that they are 100% guaranteed by the UK government. Any change to this guarantee requires 3 months notice on the part of the UK government.

The next best deposit guarantee scheme is National Irish Bank which guarantees deposits upto 300,000 DKK approx. €40K

NIB are AA1 rated, they have the highest rating of all the Irish Banks due to the Danske Bank ownership, according to their website.

What about Prize Bonds?

On Question 1 - As I understand it the money in your PRSA should be ring fenced inside the balance sheet of what ever company you purchased it from. Thus it can’t be used to settle liabilities of that institution other than those it has to those policyholders in the fund. (After fees etc)

Those holders would have to all be treated equally so in the event of their being insufficient assets in the fund to meet it’s obligations policyholders would recieve in theory some kind of pro-rata payment. PRSA’s are nearly all to my knowledge in unit linked funds with no guarantees other than those applying to With Profit investors. As such assuming your not a With Profit investor you would get whatever surrender or transfer value the fund owed you the day before the institution got into trouble less the costs of executing that surrender or transfer.

That’s just my understanding of it though

They are state guaranteed but from memory I think the yield is just 3% tax free
With the majority of that coming from the monthly jackpots

Are you sure you’re not thinking of premium bonds in the UK? I don’t think there is any yield on them in Ireland. I think it’s estimated that you might make 3% if your numbers came up regularly, but I think that is calculated by taking the total prizes and dividing by the number of tickets. I had a thousand pounds of them for two years and didn’t win a dicky-bird!

Still, my thousand pounds was still a thousand pounds at the end of the two years.

No I’m thinking of the Irish prize bonds.
I was just converting the 3% expected winnings into a yield.

Isn’t 3% tax free better than, say, 4.3% from RaboDirect on which you have to pay 41% tax (which leaves only 2.537%)?

Two things:

  1. The yield only applies if you win. This is a random event for each prize. The same person could win all of them (but you would have to think that the game is rigged then!). There is no inherent payout. You are essentially betting the money.
  2. DIRT is currently 20% flat rate. If, as 2Pack suggests, it will go to marginal rate, then Pill has pointed out the guaranteed return on tax free government bonds through An Post begins to look quite attractive. Only if the government don’t have to remove that tax free status, as Pill has also pointed out!

On my tax return I have to declare any interest earned, and they refund me the 20% DIRT and then charge me 41% on the interest. So I’m paying 41% on interest earned from the regular banks.

Gulp That means I probably am too! Bugger, another special tax on the prudent self-employed.

Does the same system apply for PAYE workers, if they, ahem, remember to submit a tax return?

Look, let’s nail this once and for all. 20% satisfies your tax liability in full. I’m a CA and I know what I’m talking about :wink:

If however they increase DIRT to 40% or an effective 41% (being effectively what Mambo incorrectly read as being the current situation) then yes, if you’re paying tax at 41% then you’ll be liable for the additional 21%.

I suggested many months ago that the move to tax deposit interest at the marginal rate of tax was being considered by Revenue.

dirt tax is 20%

Some hope! :smiling_imp: