State savings

Shaz

Registered User
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206
Highest Term Deposit Rates

1 Year - Permanent TSB - 3.06%
1 Year 6 Months - KBC - 3.00%
3 Years - State Savings - 2.28% Tax Free
4 Years - State Savings - 2.57% Net
5 Years - State Savings - 2.83% Tax Free

Hi,
Please could someone explain to me the difference between Net and Tax Free against the state savings rtes above. Thanks.
 
They are all AER rates. The PTSB and KBC ones are subject to DIRT at 33% and PRSI at 4% (for self-employed currently, and everyone from 2014).

The 3 and 5 year state savings (Savings Bonds and Savings Certs respectively) are completely free of tax.

The one with the "net" amount is the 4 year National Solidarity Bond. It's more complicated because part of the interest is taxed. It pays an 8% lump sum at the end of the 4 year term which is tax free, and 1% each year which is subject to the 37% tax (33% DIRT + 4% PRSI).

So the calculation is as follows:
8% over four years = 1.94% AER.
Additional 1% per year less 37% tax = 0.63%

1.94% + 0.63% = 2.57% Net.
 
It's not 100% that the 4% PRSI will go onto the 4 and 10 year bond - 2nd issue of bonds might be treated differently to 1st issue - we just don't know.
 
It's not 100% that the 4% PRSI will go onto the 4 and 10 year bond - 2nd issue of bonds might be treated differently to 1st issue - we just don't know.

Fair point. If not, then add 0.04% to 2.57%, giving 2.61% Net for PAYE workers ... I presume self employed already pay the 4%.
 
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