40K to invest for 5 Years, no risk!

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killarney

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My wife and I have 40K from SSIA savings that is lying idle in our bank account for the last few months. We'd like to invest for 5 years, without risk (so no interest in equities as we both have pensions with large % equities already) and hope not to have to touch it during this time.

I was thinking from looking at the threads in investment section that a split like the following might be the best option?

Wife, myself and joint accounts 10K each Regular Rabodirect savings account @5% AER = 30K
With the remaining 10k in AIB special term account @ 4.8% AER

Any other/better ideas out there?
 
There is a Special Term Account with AIB ( BOI also have it).

Invest for 3 (4.35%) or 5 yrs (4.75%).

No DIRT applies to the first 480 or 635 Euro interest per yr. So over 5 years you save 635 x 0.2 x 5 = 635 in DIRT if you invest 20k in an account.

Catch is that the interest rate is variable. This would be ok if they explined how it would vary e.g. will it always at least match ECB rates ?
I've trying to get AIB to confirm the parameters within which it is variable but no luck yet. I'm a bit worried that they could drop the rate below ECB rates once all the SSIA money is swept up. As you must lock in for 3 or 5 yrs you would be snookered. But by the same score it may increase if ECB rates increase .

Have spoken to AIB who say they won't drop it below ECB rates but won't put it in writing.

If you both open an account then you could gain from doubling the interest limit and both of you get the maximum benefit.

May also be worth asking some of the higher interest paying institutions if they offer this type of account.

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Deposits don't necessarily mean no risk. There is always a risk that inflation will outpace net deposit interest in which casey your money is losing real value. At the moment even some of the higher rates on offer are less than inflation once DIRT is deducted.
 
Aidan 119, is Rabo not better @5%AER as I don't think you are locked in as is the case with AIB?

I suppose that is always going to be the case with inflation vs. deposit accounts Clubman are you suggesting I should consider equities?
 
killarney said:
Clubman are you suggesting I should consider equities?
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Over a five year period it might be an idea to at least consider putting some of the money into a low charges unit linked fund even if it means choosing a very low risk/reward fund if you are risk/volatility averse.

But you probably really need independent, professional advice from somebody who can do a thorough fact find and review of your overall circumstances and needs.
 
Assuming rates don't change:

If you invest 20k for 5 yrs with AIB you end up with 24,862 after DIRT, assuming you leave the interest in the account to grow each year.
This gives after tax AER of 4.45%.

I assume the Rabbo is 5% AER before DIRT -
If you invest for 5 years , and reinvest the interest each year you end up with 24,333 after tax.
This gives after tax AER of 4%

So on this basis AIB Special term is best because you save more on the DIRT than you lose with the lower rate. But your money is locked. But if are sure you don't need to access it then there is no problem.
The interest rate is not locked though. This may even work to your advantage as they may increae it if rates jump. But they won't clarify it for me.Maybe you can have more success. They told me that nobody else asked this question!!!
Maybe you could put half in the 5 year AIB account. This gets over the problem of locking all the money.

Big problem is what both will do with their interest rates in 6 mths time.
But we can only work of what we know now. If we assume that both will change their rates by the same amount then it doesn't matter.

If you've already left it in your account for a few mths then that indicates to me that you are not the type of person that really wants to be getting involved with the hassle and worry of funds/stocks etc . just go with what you feel comfortable with, which is a bank deposit. We are past the period of ultra low interest rates so the differential between equity funds and deposits is narrowing.
 
aidan119 said:
If you've already left it in your account for a few mths then that indicates to me that you are not the type of person that really wants to be getting involved with the hassle and worry of funds/stocks etc .
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For what it's worth investing through a low charges unit linked fund need not be any hassle.
 
What sort of bonds? Government bonds/gilts? Corporate bonds? Tracker bonds? Prize Bonds?
 
The ones that keep pace with or exceed the inflation rate... Fixed interest securities to you CM.

Maybe the OP should consider them.
 
Is investing in fixed income securities something an individual should consider? Isn't the tax situation unfavourable?

FWIW, you could invest in a bond fund, like that offered by Quinn.
 
What about using 25K as lump sum against our mortgage, bank have confirmed it would knock 4 years off i.e 20 to 16 years.

We're still undecided about other 15K would it make sense to put in Special term Account as we already both do monthly saver accounts?
 
Itchy said:
The ones that keep pace with or exceed the inflation rate... Fixed interest securities to you CM.
Click to expand...
Where can an individual buy these, what rates do they offer, what charges apply, what tax treatment applies, what sort of term etc.?
 
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