Option for Regular Savings

D

dodo

Registered User
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I have E620 after tax a month from a widows pension .I want to put away so I can gift to my daughters in eg in 10 years.
I have my work pension maxed out via AVC.
Revolute have Regular Savings at 3.49%.
APR.
Is there anything else worth looking into,no risk investment.
Age 53
 
dodo said:
no risk investment.
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No such thing. Deposits aren't no risk due to the significant risk of inflation outpacing returns after DIRT and your money consequently losing real value.

For a 10 year timeframe (or even an average 5 year term) it would be crazy not to at least consider some level of equity exposure. E.g. low charges unit linked fund, ETF (but then deemed disposal is an issue), or direct equity shareholding, etc.

This stuff has been covered many times in many threads before. Search for threads like "regular savings", "child savings" etc.
 
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Great call,
I checked Revolut and there is 2 Vanguard S&P 500 1. (Acc ) 2
(Dist) $97 is the price. So if I wanted to invest 5K and leave for 10 years then choose Accumulation account. Is it that straight forward?

I always hear Warren Buffet mention investing in the S&P 500, and on average about 10% annual profit and if you leave for a least 10 years you will be ok as there is ups and downs but on average you are up ,, I have read few articles about Interactive Brokers and seem to be recommended. I also know Revolut is an option, I might want to put lump some of 40K and then on top of that invest €620 a month. I do have my pension maxed out with AVC and have no debt,
 
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Given all the fraud stories, I would be very reluctant to put so much money in Revolut.
There are other options, such as de Giro and Trade Republic.
Trade Republic are giving 3.5% interest on money held on deposit up to 50k. And you can set up a monthly payment into an S&P 500 ETF.
If going the ETF route, pick the accumulating (ACC) option. Don't pick the distributing (DIST) option. Distribution means it pays you the dividends every year and you have to pay 41% tax each year on that. Better to leave the dividends to accumulate in the EFT, where they should continue to grow. Then you just have to pay the tax at the end of the eighth year.
 
I am going to invest in as you advised CSPX (Accumulative) which invests in the S&P 500 via Interactive Brokers for 10 years, I will put lump sum in myself as I in my early 50s and have maxed out my AVCs with my job pension, and might top up with the €620 or partial amount. anything else I should be aware off, cheers
 
Read up on "deemed disposal" exit tax for ETFs. You will have to declare and pay tax at 41% on your gain at the end of year 8, irrespective of whether you actually sold the ETF shares or not. When you do sell, say in year 10, you get a credit for the tax already paid in year 8. And none of the platforms will do this for you. You have to manage it yourself.
 
ClubMan said:
Deposits aren't no risk due to the significant risk of inflation outpacing returns after DIRT and your money consequently losing real value.
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The myth that will not die.

The latest inflation print from the CSO puts the CPI at 1.7%. The OP will comfortably exceed that with a deposit rate of 3.49%, even after-DIRT.

Yes, there have been periods when competitive deposits rates have been less than the rate of inflation. There have also been periods of 10 years and more where equities have returned less than inflation. But equities are unquestionably more volatile than deposits.
dodo said:
I am going to invest in as you advised CSPX (Accumulative) which invests in the S&P 500 via Interactive Brokers for 10 years,
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Please make sure you fully understand how this investment will be taxed before you pull the trigger. In short, the tax regime for ETFs is a bit of a nightmare.
 
Sarenco said:
The myth that will not die.

The latest inflation print from the CSO puts the CPI at 1.7%. The OP will comfortably exceed that with a deposit rate of 3.49%, even after-DIRT.
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I said "risk". I didn't say that this was the case right now. Deposits come with their own risks. There is no such thing as a no-risk investment as requested by the original poster.
 
I think the risk profile of investing in equities and putting cash on deposit are very different. For the most part, unless something very unusual happens, with deposits, you at least wont lose any of the original capital, which would be what most people would consider no risk.
 
Don't you think that CPI isn't much of a metric when actual assets, land, cars, property, equities is multiples higher than CPI of 1.7%?

People care when their rent / car costs almost double in 4 years not when toilet paper or beans prices have gone up 10% over the same time.
 
You can use whatever metric for inflation you want.

My simple point is that there is a possibility that the return on any asset will be lower than the rate of inflation over any given period.

There is nothing unique about cash deposits in this regard.
 
S&P 500 has average 10% a year historically , doing calculations at conservative 6% (€650 a month for 10 years) know there is 8 year exit with ETF /inflation ,just on figures below

Where would you invest,

ChatGPT states
So, you would have approximately €94,520 net after 10 years after investing €78,000, considering a 6% average annual return and 41% tax on profits. (if it did usual 10% then Net €106,320)

EG Regular savings account (Revolut)
So, you would have approximately €87,380 net after 10 years, considering a 3.49% APR and 33% tax on the interest earned.
 
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Hrm. Did the magic robot provide its workings? I make it 117,401 net after 10 years at 6%, or 143,367 at 10%.

Or about 98k for the Revolut case.

(For the ETF case, even if you take the worst possible interpretation, where the entire return is a distributed dividend, taxed at 41%, and not re-invested, that's (78000*0.59*0.06*10)+78000=105,612.)

EDIT: Oh, is this in real terms, or something?
 
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ChatGPT and Co Pilot verifies it is correct,
  • Calculate the Gross Final Value:
    • Monthly contributions of €650 with a 6% annual rate (0.5% monthly) over 120 months.
    • Using the future value of an annuity formula for monthly compounding, this should yield around €107,600 before taxes.
  • Calculate the Total Contributions:
    • €650 x 120 months = €78,000.
  • Calculate the Gain and Apply the Tax:
    • Gross profit = €107,600 - €78,000 = €29,600.
    • Tax on the profit: €29,600 x 41% ≈ €12,136.
  • Calculate the Net Amount:
    • Final net amount = Gross final value - Tax on profit = €107,600 - €12,136 ≈ €95,464.
 
Tell it you think it's mistaken and I bet it gives you different results.
 
dodo said:
  • Calculate the Gain and Apply the Tax:
    • Gross profit = €107,600 - €78,000 = €29,600.
    • Tax on the profit: €29,600 x 41% ≈ €12,136.
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ChatGPT and Copilot do not calculate deemed disposals. There should be additional tax payments after 8 years that aren't accounted for here, which reduce the profit.
 
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ClubMan said:
Tell it you think it's mistaken and I bet it gives you different results.
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Summary​

So, after 10 years of investing €650 per month at a 6% return with a 41% tax on profits, the net amount would be approximately €94,697. Thank you for encouraging a second look!


I just did with calculator and its result was €108,97 Gross so looks correct,
 
Corola said:
ChatGPT and Copilot do not calculate deemed disposals. There should be additional tax payments after 8 years that aren't accounted for here, which reduce the profit.
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Just taking an average, at 8 yr mark I could pay the tax as per Revenue rules,
 
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