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Wednesday 15 August 2018

The Money Doctor: Deposit guarantee confusion

Q I AM still confused about the guarantees of deposits in this country. I have €75,000 at the moment on deposit, but will be inheritingmore than €50,000 from my father’s estate in the next month. What is guaranteed and for how long? SARAH, KILDARE

A THERE is a lot of confusion on this subject. In September 2008, under the Eligible Liabilities Guarantee Scheme, the Government gave a blanket guarantee for two years to all Irish-based deposit takers — AIB, Bank of Ireland, Permanent TSB, EBS, Irish Nationwide and Anglo Irish Bank. With Anglo, because it is now owned by the taxpayer, it could be argued it is as safe as An Post, the other state-owned financial institution.

There is, however, an underlying guarantee, the Deposit Protection Scheme, that covers all deposits under the regulation of the Financial Regulator. It covers deposits up to €100,000 per person and includes credit unions.

The Eligible Liabilities Guarantee Scheme has been extended to the end of the year. After that, the Government will have to liaise with the EU and possibly the International Monetary Fund to consider the next move. This month AIB have been looking for a five-year extension to the guarantee but Bank of Ireland want it phased out.

Either way, in your case, I would opt for An Post's three-year savings bond investment for both safety and best returns. It offers 10pc tax free -- equivalent to 4.32pc from a DIRT deducting deposit taker -- and with a maximum investment per person of €120,000, it means you'll have €5,000 over to celebrate with.

Parental Loan Decision

Q MY parents cannot afford the night classes I want to take but will guarantee a loan. I have a part-time job that would pay my monthly loan repayments and weekly costs, but I’m worried about what will happen to my parents if I stop the payments?

LAURA, VIA EMAIL

A A GUARANTEE is signed by the sponsor knowing that if the person whom they have guaranteed fails to make loan repayments, then they (the guarantor) steps in. If the guarantor cannot make the payments and the guaranteed has no assets that the lender can seize, then the lender goes directly after the guarantor's assets. Therefore, you want to be really careful about taking on such a loan and asking a person, especially your parents, to guarantee that loan.

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