Personal Finance

Barry McCall explores SSIA options available while St. Patrick's Credit Union advises members on savings with car loans.

Get smart with your savings

There are lots of “special offers” out there from the financial institutions looking to provide a new home for people’s SSIA savings. Some of these sound very attractive, with several institutions offering deposit interest rates of 3% and more for lump sum savings while there is a whole plethora of investment products available which have been specifically designed to attract SSIA holders.

Many SSIA holders will probably look for the safe option of deposit account savings – at least initially, before deciding on some other longer term plan.

However, those considering leaving their money on deposit could benefit from a smarter option by combining lump sum savings accounts with regular savings accounts. A number of leading banks and institutions have recently announced extremely attractive deposit rates for regular savers – far higher than are being offered to lump sum investors. This is because regular savers are usually seen as more valuable, long-term customers than lump sum investors.

Indeed, you can now get more than 6% AER (annual equivalent rate) for regular savings with a number of banks. Annual equivalent rate is a means of expressing the total interest received on your money in a full year. It differs from other means of calculating interest rates as it takes into account the number of occasions that the institution actually adds interest to your account.

For example, two institutions offering precisely the same rate of interest may actually have very different AERs. This due to the fact that one may apply interest every month while the other may only do it on an annual basis. The saver with the institution that applies interest every month will benefit from the compounding effect of the monthly interest additions. There are some catches to these offers of very high interest rates.

There are limits to the monthly amount you can save and there are some penalties for withdrawals, and of course you must commit to saving for a certain period. However, with SSIA holders well used to regular savings by now these present no great difficulties. After all, if a person has already been saving €200 or more every month for the past five years it should be no hardship for them to commit to saving a similar amount for the next three years or so.

But you needn’t even keep up your higher rates offered to regular savers. The trick for smart savers is to combine lump sum and regular savings – put your lump sum into an account which not only offers a decent rate of interest but also allows for regular withdrawals. Then use the withdrawals for your high interest regular savings account.

Of course, you can also top this up by continuing with your own regular savings, thus benefiting even more from these exceptionally high rates of deposit interest.

But before anyone gets carried away. It has to be remembered that DIRT tax is applicable on interest which will lower even these high rates to an effective 4.5% or thereabouts. With inflation running at not far short of that level this form of saving will only really protect the real value of your savings and won’t add to it all that much.

It may not be too late to maximise the value of your SSIA
It may not be too late to top up your SSIA. The scheme allows investors to vary the amounts they save each month once they stay within the minimum limit of €12.70 per month and the maximum of €254 per month. If you are saving less than the maximum and your SSIA is not due to mature for a few months yet you may still be allowed to increase your monthly savings and benefit from the 25% Government top-up on each extra Euro you save.

However, whether you are allowed to top up your account depends entirely on your SSIA provider. Some providers only allow changes to be made once a year while others allow changes as often as you like after the first year. If you’re interested in maximising the value of your SSIA you should contact your provider to check out your options.

St. Patricks Credit Union - Car Loans

December is the month when a lot of people think about changing their cars. If you are one of them, then finance the purchase with a loan from St. Patrick’s Credit Union and save yourself hundreds of euro in the process! The interest rate is now just 6.5% p.a. Which is one of the lowest rates offered for car loans by any financial institution in Ireland.

For example: The repayment on a €10,500 loan with the Credit Union over 3 years is €321.82 per month i.e. a total interest charge of €1,085.52. Compare this with the same loan from a Bank or Building Society, they have a typical monthly repayment of €334.00 resulting in a total interest charge of €1,524 .This would be a saving for you of €438.48!

No hidden charges or extra payments at the start, or end of the loan term, There are with banks and building societies.

AIB Bank charges a documentation fee of €63.46 and a completion fee of €12.70. Bank of Scotland charges a documentation fee and a completion fee of €75 each.

No penalties for making lump sum payments or clearing your loan early. There are with banks and building societies.

National Irish Bank charge €30 for clearing your fixed rate loan early and does not allow a lump sum payments to be made.

Free Loan Insurance on all loans.

If you are in good health at the time of making your application, your loan balance is insured (in the event of death) at no extra cost. Banks and building societies do not provide such a service. For further information or to make an application please see our website www.stpatrickscu.ie or contact the office on 01-6325100.