KBC regular saver maxed out

Mikemoran

New Member
Messages
9
Hi there,
I have had a KBC regular saver for some years now and have built it up to just under the 40k cut off where the interest rate drops off dramatically. The interest rate is currently 1.25%. I dont want to go over 40k in the account. Should I
1. Withdraw a small amount to say 38k and then change to the minimum monthly contribution of €100 to maintain what would be essentially a decent rate for an on demand deposit account. Or
2. Take out the 40k and look elsewhere for a better return. I dont need the money in the short term.
Any advice would be much appreciated.
Cheers.
 

Mikemoran

New Member
Messages
9
Cheers Ciaran for your reply.
I had thought as much.
I'm going to reduce the monthly savings to the minimum €100 and keep the account under the 40k threshold.
Any suggestions as to where to put the balance of my regular monthly savings, approx €750 p/m
KBC's suggestion is their 'start to invest' monthly saver, essentially a global ETF, I presume I need to be wary of charges with a product like that?
 

Zenith63

Frequent Poster
Messages
374
Something like the 5 year state savings certificates (https://www.statesavings.ie/our-products/5-year-savings-certificates) might be an option. 0.98% AER, but that is tax free so (assuming you are liable for DIRT) you're getting more like 1.6% if you compare it to DIRT liable bank savings. You can get your money out with a few days notice if required, it's not locked in, but you won't earn as much of the interest if you don't hold it for the full term.

Also worth considering if you have any debt (car/mortgage etc) you'll usually be better off paying that down as again the "return" is tax free, so will be higher than the loan interest rate might indicate.
 

Mikemoran

New Member
Messages
9
Something like the 5 year state savings certificates (https://www.statesavings.ie/our-products/5-year-savings-certificates) might be an option. 0.98% AER, but that is tax free so (assuming you are liable for DIRT) you're getting more like 1.6% if you compare it to DIRT liable bank savings. You can get your money out with a few days notice if required, it's not locked in, but you won't earn as much of the interest if you don't hold it for the full term.

Also worth considering if you have any debt (car/mortgage etc) you'll usually be better off paying that down as again the "return" is tax free, so will be higher than the loan interest rate might indicate.
Thanks for your reply, much appreciated. Had considered that and I will use some of the monthly savings to overpay on the mortgage but to be honest it's very manageable and the rate is pretty good at 2.6%. No other loans thankfully. As I will have the 40k in cash savings at 1.25% I am happy to take on some risk starting a new monthly saver, hence a ETF based fund appeals to me rather then the safer returns you mention.
 

Zenith63

Frequent Poster
Messages
374
Thanks for your reply, much appreciated. Had considered that and I will use some of the monthly savings to overpay on the mortgage but to be honest it's very manageable and the rate is pretty good at 2.6%. No other loans thankfully. As I will have the 40k in cash savings at 1.25% I am happy to take on some risk starting a new monthly saver, hence a ETF based fund appeals to me rather then the safer returns you mention.
Do you have a pension? If you choose the right one you should have access to a decent array of funds that will give you full equity exposure but with an initial bump of ~50% (because contributions go in tax free) and tax free growth. I'm quite big into investing in shares and seeing a couple of grand a month going into equities this way more or less scratches my stock market itch.

I have a small DeGiro account for buying and holding a few ETFs and a small spreadbetting account where you can take a small gamble on whatever share you think is cheap this month without tax implications. Again just to scratch the itches of wanting to invest in the stockmarket, but the vast majority of savings go to mortgage/pension because the gains here are virtually impossible to beat with post-tax money in the markets.

Took me a long time of reading AAM to get to this conclusion, I was previously of the view that your mortgage is the cheapest debt you'll ever get so why pay it down early when there are such tasty returns to be had in the stockmarket and why lock money away in a pension where it is inaccessible for decades (getting older and realising early retirement age is not so long away solved this one!).
 

Mikemoran

New Member
Messages
9
Do you have a pension? If you choose the right one you should have access to a decent array of funds that will give you full equity exposure but with an initial bump of ~50% (because contributions go in tax free) and tax free growth. I'm quite big into investing in shares and seeing a couple of grand a month going into equities this way more or less scratches my stock market itch.

I have a small DeGiro account for buying and holding a few ETFs and a small spreadbetting account where you can take a small gamble on whatever share you think is cheap this month without tax implications. Again just to scratch the itches of wanting to invest in the stockmarket, but the vast majority of savings go to mortgage/pension because the gains here are virtually impossible to beat with post-tax money in the markets.

Took me a long time of reading AAM to get to this conclusion, I was previously of the view that your mortgage is the cheapest debt you'll ever get so why pay it down early when there are such tasty returns to be had in the stockmarket and why lock money away in a pension where it is inaccessible for decades (getting older and realising early retirement age is not so long away solved this one!).
Thanks for your reply. I do have a pension, which I contribute the same amount to each month as I do my regular saver, approx €950. No doubt a good option to increase my contribution there though. Yes it's always tempting to leave the mortgage as is when its manageable but it makes sense to look at overpaying it as an investment in itself.
 

Mikemoran

New Member
Messages
9
Do you have a pension? If you choose the right one you should have access to a decent array of funds that will give you full equity exposure but with an initial bump of ~50% (because contributions go in tax free) and tax free growth. I'm quite big into investing in shares and seeing a couple of grand a month going into equities this way more or less scratches my stock market itch.

I have a small DeGiro account for buying and holding a few ETFs and a small spreadbetting account where you can take a small gamble on whatever share you think is cheap this month without tax implications. Again just to scratch the itches of wanting to invest in the stockmarket, but the vast majority of savings go to mortgage/pension because the gains here are virtually impossible to beat with post-tax money in the markets.

Took me a long time of reading AAM to get to this conclusion, I was previously of the view that your mortgage is the cheapest debt you'll ever get so why pay it down early when there are such tasty returns to be had in the stockmarket and why lock money away in a pension where it is inaccessible for decades (getting older and realising early retirement age is not so long away solved this one!).
One final question Zenith, the DeGiro account for purchasing ETFs, I presume this works out a lot cheaper than for example KBCs version? Also, is it straightforward to sort out the tax implications.
Following advice here I'm thinking my regular saver amount will be divided equally 3 ways
1. Overpay mortgage
2. Increase pension
3. Set up regular saver following an ETF via KBC (ease of set up, track via the existing app) or some other, probably cheaper, provider.
 

RedOnion

Frequent Poster
Messages
3,621
Mike,

Re mortgage.
You're borrowing at 2.6% in order to put the money on deposit at 1.25% which is subject to DIRT. You're throwing money away.
If you've no medium term need for the money, pay a lump sum off the mortgage.

KBC investment funds are not ETFs. Make sure you understand what they are and the fees associated. The one I looked at had a 1% subscription fee, and an ongoing annual charge of 1.6%.
I use a similar life fund for a regular saving that I have for its convenience, but the charges eat into your return.

You haven't posted any details about your overall financial position, so it's impossible to guide you, but in general the taxation makes investing outside a pension somewhat unattractive to Irish investors.

I'd maximuse pension, pay lump sum off the mortgage, and keep emergency cash fund in the regular saver account (making loads of assumptions to get there).
 

Zenith63

Frequent Poster
Messages
374
One final question Zenith, the DeGiro account for purchasing ETFs, I presume this works out a lot cheaper than for example KBCs version? Also, is it straightforward to sort out the tax implications.
I’m not familiar with the KBC investments, other than having a general sense that these types of investments done through your retail bank tend to be heavily loaded with fees and invested in such low risk assets that the returns will be very underwhelming.

Looking at the KIDD ( https://www.kbc.ie/KBC/media/Investment-Funds-PDFs/KIID/Medium-KIID.PDF ) for the fund KBC reference on their site (not sure if you get a choice of others) they take 2.5% of anything you invest then 1.68% every year after that. This fund is 55% equities, 45% bonds (very conservative).

With the likes of DEGIRO, to buy say the iShares S&P500 ETF would be 0% when you buy then 0.07% per annum ETF internal fee. You can choose from hundreds of shares and ETFs to suit you, though an S&P500 and MCSI World Index ETF is usually enough.

If you’re doing a tax return anyway I don’t think it’s that big a deal to handle the ETF stuff. If you’re not, then yes there’s a bit of extra effort, but then that applies for most investments beyond bank stuff or government savings certs.
 
Last edited:

Gervan

Frequent Poster
Messages
1,040
Is there an option to buy a €1000 5 yr savings bond every month? If for any reason one needed the money before term end, at least only some of the investment would have reduced interest paid out.
 

Zenith63

Frequent Poster
Messages
374
Is there an option to buy a €1000 5 yr savings bond every month? If for any reason one needed the money before term end, at least only some of the investment would have reduced interest paid out.
Once you’ve bought your first batch (a paper form), you can then buy online very easily with a debit card each month. I didn’t see anything about automating this to happen each month however.

The T&Cs mention partial redemptions, so I don’t think there’s a requirement to take all your money out in one go, if you needed to get some early.
 

Mikemoran

New Member
Messages
9
Mike,

Re mortgage.
You're borrowing at 2.6% in order to put the money on deposit at 1.25% which is subject to DIRT. You're throwing money away.
If you've no medium term need for the money, pay a lump sum off the mortgage.

KBC investment funds are not ETFs. Make sure you understand what they are and the fees associated. The one I looked at had a 1% subscription fee, and an ongoing annual charge of 1.6%.
I use a similar life fund for a regular saving that I have for its convenience, but the charges eat into your return.

You haven't posted any details about your overall financial position, so it's impossible to guide you, but in general the taxation makes investing outside a pension somewhat unattractive to Irish investors.

I'd maximuse pension, pay lump sum off the mortgage, and keep emergency cash fund in the regular saver account (making loads of assumptions to get there).
Thanks RedOnion, I presumed it was an ETF as tax wise it's the same issue of declaring every 8 years but fair enough if not, I must research it more. Charges you mention sound about right, so €10 of every €1000 gone straight away + management charge on top.
 

RedOnion

Frequent Poster
Messages
3,621
so €10 of every €1000 gone straight away
Actually there might be a 2nd 1% gone straight away. I think there's a 1% charge from KBC, and also the government levy of 1%. I'm not very familiar with the KBC products, so someone else might be more familiar.
 

Mikemoran

New Member
Messages
9
I’m not familiar with the KBC investments, other than having a general sense that these types of investments done through your retail bank tend to be heavily loaded with fees and invested in such low risk assets that the returns will be very underwhelming.

Looking at the KIDD ( https://www.kbc.ie/KBC/media/Investment-Funds-PDFs/KIID/Medium-KIID.PDF ) for the fund KBC reference on their site (not sure if you get a choice of others) they take 2.5% of anything you invest then 1.68% every year after that. This fund is 55% equities, 45% bonds (very conservative).

With the likes of DEGIRO, to buy say the iShares S&P500 ETF would be 0% when you buy then 0.07% per annum ETF internal fee. You can choose from hundreds of shares and ETFs to suit you, though an S&P500 and MCSI World Index ETF is usually enough.

If you’re doing a tax return anyway I don’t think it’s that big a deal to handle the ETF stuff. If you’re not, then yes there’s a bit of extra effort, but then that applies for most investments beyond bank stuff or government savings certs.
Once extra mortgage and pension payments sorted, this sounds exactly like what I'm looking for, are accounts easy to set up and track? Those fees are very low compared to bank products. I presume you just give your annual statement to accountant to sort out the tax? Thanks for all advice.
 

Zenith63

Frequent Poster
Messages
374
Once extra mortgage and pension payments sorted, this sounds exactly like what I'm looking for, are accounts easy to set up and track? Those fees are very low compared to bank products. I presume you just give your annual statement to accountant to sort out the tax? Thanks for all advice.
Very easy to setup, all online even the ID verification just requires uploading photos of your passport. Make sure to tick the box to get a ‘Custody’ account though as you go through, gives you extra protection if DEGIRO ever got into difficulty (other threads cover this here).

Personally I’d setup the account now and just stick a couple of hundred quid in there to scratch your investing itch, and begin to understand how it all works, then focus on mortgage/pension.


Yes an accountant will sort it out very easily as part of a tax return.
 

Mikemoran

New Member
Messages
9
Thanks so much for all the advice, much appreciated. Looking into a DeGiro account now and will use it for small monthly amounts, will use the bulk of the regular savings on mortgage overpayment and pension top up. Many thanks.
 
Top