Larry Lain
Registered User
- Messages
- 9
The first three issues of the An Post National Solitary 10 year bond are different from how later issues of this (and from how the more traditional Bonds and Certs) work.
Issue one that started in 2010 had an interest rate of 40% tax free & 10% taxable, so it was advertised at 50% return.
In the early months of 2013 – the year your query is about – I think that Issue No 2 was open, which paid out 35% tax free & 10% taxable (so it was advertised at 45%). However in mid-2013 they seemed to have closed this issue and opened Issue No 3 which pays out 25% tax free & 10% taxable (so advertised at 35%).
I had a small sum in Issue No 1 which matured recently. What I got back on maturity was the capital plus 40% while I found that the other 10% which it had earned over the decade was being held separately in a DIRT paying savings account that I needed to close separately.
I always found An Post’s annual statement slightly confusing as it shows the capital in one column and the tax free interest earned so far alongside it; but then I would need to look for a separate account number elsewhere on the statement which related to the savings account where the taxable part of the interest was being held and calculated separately.
So if you think you are getting a different rate of interest from the one originally advertised it may be that
A) the interest being shown on your statement is being divided up in this way, with the interest column for the cert only showing the tax free part, while the taxable part is displayed elsewhere under a different account number.
Or B) You may have applied to purchase just before the changeover in 2013 from issue No 2 (45%) to issue No 3 (35%) and been unlucky in that you got caught by the rate change. They were great rates, even at the time, and a long way from the rates now on offer.
Hi Larry, I am not a financial expert like many of those who post on this site, but judging by the date you give (you seem to have been unlucky not to get in a month earlier) you seem to have this product detailed below:
“Rates on bonds bought from June 2013 Onwards
The maximum maximum gross return possible is now 35% over 10 years.(reduced from 50%)
The annual rate of 1% interest remains the same but the bonuses have been reduced .
If you cash in the bond at the end of 5 years you will get a 6% Bonus.
At the end of 7 years you will get a 13% Bonus and if you keep the bond for the full 10 years you will get the highest 25% Bonus. DIRT will be payable on the basic interest – but not on the bonuses.
A 35% gross return over 10 years is 3.05% AER . After DIRT this comes to 2.79% AER.
An investment of €1000 in solidarity bonds for 10 years will result in a balance of €1317 Net”
If so, then I think you are mistaken (but it is an easy mistake because of how they present their annual statements) in thinking that on an investment of €22,000 your maturity value is €27,500. This is the figure it may give on the statement but the €5,500 maturity interest that is shown (as being due in July 2023) relates only to the 25% tax free bonus you get if you leave it in for 10 years. So when it matures in July 2023 you will get this €5,500 tax free (giving you the €27,500 you mention), but An Post also has a separate account in your name into what interest at a rate of 1% a year is being paid for the ten years. This is what deduct DIRT on).
This gives the very confusing headline figure of 35% interest for 10 years. So the product is basically structured so that it pays a fixed rate of 1% (less DIRT) for each of the ten years and then an additional tax free 25% bonus after ten years.
Like I say, I know this because I had one of the original (Issue No 1) 10 year bonds that matured this year, which was meant to pay 50% overall but the maturity notice only showed 40% and when I phoned they explained that the other taxable 10% is still sitting in an account in my name waiting to be closed whenever I want. (As it still seemed to be earning 1% I left it there). So, unless I am totally mistaken, you will find that in July 2023 you will also have an additional roughly €2,200 (less DIRT) waiting to be paid out.
The way they structured this bond was so unnecessarily complex that after Issue No 3, An Post just made it a straight forward tax free product (with interest not paid in two different confusing ways) in every Issue from then on.
One thing to say about An Post is that they are very helpful on the phone (with none of the 40 minutes listening to jingles like some places) and if you give them a ring they will hopefully confirm all this and you may be looking at a slightly better return that you currently think you are looking at.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?