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Tuesday 26 September 2017

The money doctor: Savings safe?

Q I have €35,000 in my bank deposit account. I only found out this week the interest rate is 0.1pc so I am going to transfer it, but where is safe?

Theresa, Rathfarnham

A Currently, the number one issue for all depositors is safety. There are two State-owned, and therefore safer, deposit takers: An Post and Anglo Irish Bank. The other Irish deposit takers (AIB, Bank of Ireland, Permanent TSB, EBS, Irish Nationwide BS) are guaranteed until next September by the Government, though there is talk of a five-year extension. I would want to see the guarantee in place before committing beyond September with these institutions.

Ulster Bank and formerly First Active are basically owned by the British taxpayer with 15pc owned by Royal Bank of Scotland. National Irish Bank is owned by Danish group Danske Bank, Bank of Scotland Halifax by Lloyds/HBOS (in turn 47pc owned by the British taxpayer ) and Investec Bank -- a South African bank-- guarantee up to £50,000 (€58,399) per person by the British Financial Regulatory Authority. Belgian bank Rabo Bank, owners of ACC Bank, is the only AAA-rated bank in the country.

As far as rates are concerned, the best rate is equivalent to 4.32pc per annum but you will have to lock it away for three years: An Post's Savings Bonds guarantee 10pc tax free on maturity.

The best one-year fixed-rate is 3.5pc (Anglo Irish and INBS) while best notice is Permanent TSB's 35-day notice at 3.35pc. Best on-demand account is Nationwide UK at 3.3pc, though INBS offers 3.25pc (up to €20,000) and Anglo offers 3.1pc on its Premium Demand account.

Also, check and recheck your deposit rates on a continual basis as your deposit taker is not going to notify you when your deposit rate is being reduced or a better product is launched.

CLAIMING YOUR PAST TAX ALLOWANCES

Q I have not claimed for any tax relief on my medical expenses or rent over the past few years. Is it too late to claim now?

Paul, Lucan

A So many PAYE employees neglect these allowances through apathy, ignorance or lack of time. Quite simply, there are a number of tax credits and allowances you can avail of to help reduce your annual tax liability including dental expenses, health and pension relief, even the bin allowance.

More importantly, you can also go back up to four years to claim these tax refunds. The average refunds are about €840, which is better in your pocket than theirs!

There are a couple of companies specialising in these rebates -- taxback.com being one -- and to start the ball rolling to see if you are eligible for a tax refund in the first place, just text MONEYDOCTOR to 53377 for a free assessment.

REDUNDANCY

Q At the age of 48 years, I was made redundant last month after 29 years in the company. My lump sum was €97,000 and it is still in my current bank account. I have a €250,000 mortgage (tracker), no other debts or savings and two teenage children. My wife does not have paid work. Should I pay this off my mortgage or keep it in a deposit account ?

Jim, Portmarnock

A Even IF you paid all your tax-free redundancy money against your mortgage, you would still have an outstanding balance that only income from employment will pay.

The key here is your next employment. You are too young to retire, plus you also have money-sapping teenagers and just wait until their third-level education starts.

You are, though, on a tracker mortgage so first of all it makes sense NOT to pay off your mortgage as you can earn greater interest on deposit than the interest you are paying on your mortgage. I also advise that you should have from three to six months annual income in a rainy day fund for a) emergencies such as car breakdowns, b) sudden loss of income and c) investment opportunities such as starting your own business.

You have no savings at all, so I would invest the full amount in Anglo Irish Bank's premium demand account at 3.1pc while you think what you are going to do, whether you find that new job or start your own little business -- you have the seed capital now. Best of luck.

John Lowe, fellow of the Institute of Bankers, is founder and managing director of Money Doctor, regulated by the Financial Regulator and author of the best-selling The Money Doctor Finance Annual 2010 and 50 Ways to Wealth (both Gill & Macmillan) now available for seminars and consultations: email seminars@moneydoctor.ie. Call 01 278 5555

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