National Solidarity Bond
The idea of a National Solidarity Bond was announced in the 2010 Budget – full details were released today.
The details of the new solidarity bond were confirmed today. It will pay an annual interest rate of just 1% a year (fixed) with added bonuses for those who leave the money in for five, seven and ten years .
The maximum bonus after 10 years is 40% – so the maximum gross return possible is 50% over 10 years .
If you cash in the bond at the end of 5 years you will get a 10% Bonus
At the end of 7 years you will get a 22% Bonus and if you keep the bond for 10 years you will get the maximum 40% Bonus.
DIRT will be payable on the basic interest – but not on the bonuses.
A 50% gross return over 10 years is 4.14% AER . After DIRT this comes to 3.96% AER.
A normal deposit account would need to be paying 5.28% before DIRT to match that rate.
An investment of €1000 in solidarity bonds for 10 years will result in a balance of €1475. (3.96% AER Net)
Keeping €1000 in the solidarity bond for 5 years will give a balance of €1137.50 – after DIRT which is 2.5% AER (Net).
The bonds will be available for purchase in all post offices from Tuesday May 4th 2010.
With some instant access accounts paying as much as 3.3% before DIRT it will be interesting to see the level of take up for these new bonds that require a 10 year commitment to get the top rate of 3.96% Net.
There are already similar rates available with An Post : – the 17th Issue Savings Certificates over 5.5 years is paying 3.53% AER (Net)
The minimum individual investment in this Solidarity Bond is €500 . Savers can deposit a lump sum or put in regular lodgements of €25 or more. (The €25 a month will be put in an An Post deposit account until you reach a balance of €500 – after 20 months).
The maximum individual investment allowed in the solidarity bond is €250,000 . (€500,000 for joint accounts) There are no fees, charges or sales commissions attached to the bond.
Savers can access their money at any time without penalty – but the longer money is left invested the greater the return in the form of bonuses.
Money invested in these solidarity bonds will be used by the government to finance capital-investment programmes.
See other bank savings rates for comparison.
Also see www.StateSavings.ie for full terms and conditions of the solidarity Bond
[...] The details for this Solidarity Bond have been released. I don't think there will be queues on MAy 4th to buy them . 1% basic rate with bonuses that can result in a maximum return of 50% gross over 10 years. More details here ; National Solidarity Bond | Money Guide Ireland [...]
April 29th, 2010 at 18:17To Good to be true.
April 29th, 2010 at 18:31I know the interest is subject to dirt and not the bonus,but is the overall money earned at the end of the term not subject to income tax as earnings from other sources and If you are on the higher rate of tax by then, it might not leave you with with much after the revenue get there share!
Finbar – The interest on the bonds IS the “overall money earned” – that is the income , there is no other income to pay tax on .
April 29th, 2010 at 22:45The rate is low enouogh without double taxation !!
If you are lodging €25 per month, can you continue making lodgements after the initial 20 months when the minimum lodgement of €500 has been reached ie can you pay €25 per month for the full term of 10 years will the 40% bonus be paid on the full amount?
April 30th, 2010 at 12:43Ciaran – my understanding is that when the balance reaches €500 – they will purchase €500 worth of bonds. If you keep that €500 in the solidarity bond for 10 years you will get the 40% bonus. If you continue paying €25 a month – you will then have to reach €500 again in order to buy another €500 worth of bonds. You will probably be better off paying €25 a month into one of the regular saver accounts in a bank and then withdraw it to buy the solidarity bond when you get to €500. The deposit rate in An Post on your €25 a month might not be as good as the banks.
April 30th, 2010 at 16:45Moneymate
Even though dirt is taken at source are you still not liabable to tax on total earnings made at say end of 10 years and returned to revenue as other income on form 11.
If so is this only applicable to this type of investment, or is there any more like this available.
April 30th, 2010 at 17:37Finbar- The bonus on these bonds is not subject to any tax in Ireland .
April 30th, 2010 at 20:31Hopefully, anyone who can afford to invest in these, will do so. If this poor country of ours is ever to get back on track, anyone who can contribute in anyway should do so – and I know all about the bankers and politicians, etc!
May 4th, 2010 at 12:49I’m thinking of saving €400 monthly in this, but a little confused. After saving my €400 monthly for ten yrs, what would be my return? Is the return based on total amount saved over the ten year period, or is the return based on year on year savings?
May 5th, 2010 at 10:50John – An Post say a regular saver option is possible – but it looks like they put those regular savings into an An post account paying 1% interest until the balance reaches €500. Then they “buy” 500 worth of Solidarity Bonds for you.
May 5th, 2010 at 11:05It will be a complicated calculation to work out your exact returns – but you would end up with several €500 bonds that would all mature at different times.
Thanks, so its more like a twenty year saving bond! At the end of the ten years my savings would be aprox €48,000. I wouldn’t get a lump sum of aprox €68,000 there and then. I would have to wait years for all the bonds to mature at different times? Get in in dribs and drabs? Is that the way it works?
May 5th, 2010 at 11:20That’s my understanding of it from reading the information on the statesavings website. You would have approx 96 bonds of €500 each maturing every month or two for the next 10 years!
May 5th, 2010 at 11:31A 40% tax-free return even when disregarding the interest / DIRT can’t be bad?
June 22nd, 2010 at 00:00Is there anything to compare?
And a minimum of €500 is achievable, unlike some of the minimums required for some high return accounts from the banks.
It is the annual rate of interest that you need to consider. Yes – 40% sounds great – but it is over 10 years. 3.96 %AER (Net) is the actual rate – which is equivalent to a “normal” deposit account paying 5.28%. An Post 5.5 year Savings Certs pay 3.53% AER Net .
June 22nd, 2010 at 08:58If I invest a 5000 lump sum to start saving what will I come out with at the end of the 10 year term?
July 5th, 2010 at 06:55Andrew – As mentioned in the artice above “An investment of €1000 in solidarity bonds for 10 years will result in a balance of €1475. (3.96% AER Net)” So – for 5000 – just multiply this figure by 5. (It will be €7375 0
July 5th, 2010 at 08:40Forgive my ignorance, I am not too familiar with all this, but it does not seem like a great deal to me.
Firstly, inflation after 10 years is sure to bring down the value of this deal.
Secondly, this is exactly the same as putting the money into a bank that gives a 4 percent interest rate per year, for ten years.
Is this not the case? I mean there are banks that do that aren’t there?
If I put 1000 into a bank with a 4percent interest rate for ten years I would come out with over 1480 at the end.
Can anyone explain how this is a good scheme, in laymans terms, because I don’t see it.
Thanks for your time.
B
July 6th, 2010 at 11:19Ben – the rate is not brilliant – as it says in the main post “After DIRT this comes to 3.96% AER.
A normal deposit account would need to be paying 5.3% before DIRT to match that rate.”
There are no normal deposit accounts giving 5.3% at the moment – but rates could rise in the next few years.
July 6th, 2010 at 12:32See the best bank deposit rates here .
Do you have to be a resident to avail of this bond?
July 10th, 2010 at 17:30If I put 20,000euro in,is my 20,000euro secure? I would hope to leave it in for 10 years, will I get 30,000 euro at the end of 10 year period? If I need to access my money sooner, will I be penalised in any way? Am I gauranteed that the interest rate will remain the same, ie not go lower, over the 10 year period?
July 12th, 2010 at 12:57