herald

Tuesday 17 October 2017

Dan White: Can my mum find a haven for her nest egg amid the crisis?

Profits from forestry investment plans are tax-exempt

I AM writing to you on behalf of my mother who is seeking to put €125,000 into some investment schemes.

She is not seeking to become a professional investor and is merely seeking a safe haven for her money with some return.

My mother, who owns her own home, has previously invested in three or four different investment schemes with IL&P and EBS.

She invested €25,000 with EBS in 2006 and has only lately seen return of approximately €2,500.

She also has €100,000 lodged with IL&P which is currently halfway through the investment period.

My mother has been in contact with both institutions seeking advice on her investments but has yet to be convinced that they meet her investment needs.

She is now considering her next move and is worried about both the economic climate and the health of the banking sector.

We recently contacted Postbank and received some literature from them but remain unconvinced.

Is the Irish forestry sector worth looking at? Due to previous bad experiences my mother won't deal with either AIB or Bank of Ireland.

DAVID

Unfortunately Postbank, a joint venture between An Post and the French bank BNP Paribas Fortis, announced in February that it was closing by the end of this year.

This leaves An Post offering a limited range of low-interest deposit accounts as well as savings bonds and certificates, which it distributes on behalf of the NTMA.

Presumably the literature David's mother has received from An Post is the savings certificates and bonds sales brochure.

While savings certificates and bonds only repay the amount invested at the end of their term, five-and-a-half years in the case of savings certificates and three years for savings bonds, they do pay a good DIRT-free interest rate, the equivalent of an annual rate of 3.53pc for savings certificates and 3.23pc for savings bonds.

Even better, the vast bulk of this interest is paid out as it accrues every year rather than being paid when the investment matures.

This is also the case with the 10-year national solidarity bond.

Irish forestry has indeed proved to be a good long-term, low-risk investment for many Irish people.

Last week Irish Forestry Funds announced that the first of its 10-year forestry investment plans had matured, delivering a cumulative 83pc return to investors.

Profits from forestry investment are tax-exempt.

IFS offers investors three options.

There are forestry investment plans, which invest in semi-mature forests and last for 10 years, forestry growth plans, which also invest in semi-mature forests and run for 12 years, and forestry funds which invest in forests for the full 30-year growth cycle.

While David didn't mention what age his mother is, I suspect that a 30-year forestry fund would be an utterly unsuitable investment for her.

Even the 10- and 12-year funds would almost certainly be inappropriate for someone in their late sixties or older.

This is because, although they have an excellent track record in delivering above-average returns, these investments don't pay any income before they mature.

If David's mother is in her mid-sixties or younger she should certainly consider investing in a forestry investment plan or forestry growth plan, perhaps splitting her money and putting half of it into savings certificates or bonds.

This would produce an income while she waits for her forestry investment to mature.

I recently started my first year at UCD and have been bombarded with credit card offers from the various banks.

Who offers the best value in student credit cards?

JOE

The best value student credit card is without doubt NIB's Standard Card.

It charges an 11.6pc interest rate on purchases and cash advances.

None of the other student credit cards come even close, with interest rates on purchases ranging from 15.5pc to 17.9pc and from 22.9pc to 23.4pc on cash advances.

Ouch!

It's advisable to start out on your student days taking care to minimise debt.

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