How Do I Get The Best Return On My Savings?

By Marc Westlake

Published on: August 10, 2020


I first raised the issue of negative real returns on saving accounts back in 2012.


Now updated to reflect the new early surrender terms and interest rates for 2021

We strongly advocate that longer-term (5 years+) investment should only be arranged via pensions and stock-market linked investment accounts to provide the potential for real growth above inflation. We also generally recommend investing in global capital markets rather than a rental property.

However, for savings with terms under 5 years we do not recommend investing in the Stock market due to the inherent short-term volatility.

Therefore, savings that represent your emergency fund or that are specifically required to meet a planned expenditure in less than 5 years should be held on deposit with the balance invested in a globally diversified portfolio.

The following analysis seeks to find the optimum structure for holding cash savings for different investment terms. Although we don’t generally recommend Prize Bonds, State Savings have some attractive characteristics which apply even if the certificates are partially encashed before maturity.

Analysis of State Savings Early Access Terms

Number of complete years

Source: NTMA State Savings, analysis by Everlake

We can see that for terms of up to 1 Year the State Savings Deposit Account offers a net of DIRT return of 0.0385%pa currently and does not suffer from the inherent limitation of the €100,000 bank deposit guarantee.

7 days’ notice is required for withdrawals of more than €3,000. Maximum holding €250,000 per individual.

The State Saving Deposit account is suitable for larger very short-term holdings joint accounts up to €500,000 e.g. a proposed house purchase.

For terms of between 1 to 3 years the 3 Year State Savings Certificates (issue 17) offer the best return even in the event of early encashment compared to the alternatives available. Note that the returns from Savings Certificates are exempt from DIRT (even in the event of early encashment) and therefore will generally provide superior returns to other bank deposits. The maximum investment is €120,000 per person per issue.

The 4-year certificate (issue 6) offers superior returns for a term of 4 years and the 5-year certificate (issue 23) is the best option for a 5-year term. Again, the maximum investment is €120,000 per person per issue.

Note that the 10-year Bond does not offer the best encashment terms until 10 years have been completed. Given that over this time-frame equity investment is likely to be more suitable and appropriate, we do not believe that the 10-year bond is worth investing in under most circumstances.

For education and illustrative purposes only. Not to be construed as investment advice.

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