Savers in Ireland continue to miss out on maximising the return on their savings

Derek Keogh, Head of Personal Savings at Anglo Irish Bank discusses recent official data which shows that the majority of savers lose out by not taking action to switch their savings from low rate payers.


Choosing the right account for you isn’t always a straight forward decision. There’s so much choice on the market and accounts can vary widely. However, doing something is better than doing nothing as the potential to greatly increase interest returns exists. Derek Keogh from Anglo Irish Bank answers some of the most frequently asked questions by savers regarding savings accounts:

“Given the wide range of products available in the market paying rates of up to 3.5% gross/AER fixed compared to low average rate that savers are actually earning (0.63% gross/AER variable for overnight / demand funds according to the Central Bank of Ireland’s latest statistics)”, Mr Keogh comments. “For the average saver, with €20,000 on deposit they could be earning over €500 more gross interest based on taking action to move from the low rate account.”

To ensure savers are comparing like-for-like, they should be familiar with the following terms as part of the comparison process:

Gross
This term generally means before deductions, when banks are promoting their products you will often see the interest rate followed by the term “gross”. This will generally mean the rate of interest earned on a deposit account for the duration and before the deduction of tax.

AER
This shows you what the interest on a savings account would be if the interest was compounded and paid out to you each year (instead of monthly or over any other period). You may earn less than the AER because your money may not be invested for as long as a year. Sometimes firms use Compound Annual Rate (CAR) instead of AER on savings and investment products.

Fixed Rate / Term Accounts
With fixed-term deposits you put money into your account for an agreed amount of time. Usually the interest rate is fixed for that period and if you take money out during that time you may pay a penalty.

Variable Rate Accounts
Variable rates rise and fall in line with general interest rate changes in the euro zone. Variable rates offer the most flexibility (over fixed rates) and allow you to withdraw part or all of your funds without having to pay any fees or penalties.

Notice Accounts
This is a savings account on which the customer is contracted to give a specified notice period before making a withdrawal. A penalty may be imposed by the bank providing the account if a withdrawal is made prior to or without the agreed notice period being undertaken.


The material contained in this article is for general information purposes only and does not constitute investment advice or an offer to buy or sell or a solicitation of any investment products or other financial product or service. You should not act or refrain from acting on the basis of any material contained in this article without seeking appropriate professional advice. All information is provided “as is” and without warranties express or implied and Anglo Irish Bank Corporation Limited accepts no liability whatsoever for any inaccuracies, errors, omissions, opinions or misleading information or for any action taken or not taken in reliance on the information in this message. Any expressions of opinion are current opinions as at the date of publication and are subject to change without notice.


Anglo Irish Bank Corporation Limited is regulated by the Financial Regulator in Ireland.



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Anglo Irish Bank Corporation Limited
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18/21 St. Stephens Green
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enquiries@angloirishbank.ie
+ 353 1 6162000
http://www.angloirishbank.ie

4 key factors for efficient saving

As the Office for National Statistics releases new figures revealing that Brits are becoming increasingly prudent in their spending habits and investing more in saving, we take a quick look at the key factors to consider before selecting the best savings accounts to meet your needs.

There are a huge number of investment and saving products on the market, but in order to get the most out of your cash you need to evaluate four key factors: funds available, investment term, required access and acceptable risk. These will play a huge role in estimating the best return available and help establish which products meet your own unique economic situation and expectations.

Funds available
The main deciding vote for products here is whether you have a lump sum to invest or are rather looking at regular payments. For best results on a lump sum, products such as saving bonds and cash ISA transfers work really well. If you’re starting from scratch you’ll be looking to make regular payments, in which case a new cash ISA can take up to £5,100 tax free every year, or a high interest savings account allows savers to make regular payments and offers an above average rate of return.

Investment term
Essentially the longer you tie up your money, the better the rate of return offered. So if you’re happy to have your investment sitting pretty, accumulating interest in the depths of a financial product, you’ll do well to opt for a long-term high interest account or investment ISA. If the investment required is short-term, cash ISA’s offer excellent tax-free annual returns.

Required access
If you need to dip in and out of the savings pot, there are suitable products on the market that allow short or no notice withdrawals. For best results shop around for individual products, comparing minimum required deposit and ensuring that there are no penalties for withdrawals. However, for savers who are happy to follow the rules of ‘out of sight, out of mind’, products that limit access, such as high interest accounts that allow only one annual withdrawal, often offer better rates.

Acceptable risk
Your position both pre and post global recession will no doubt dictate how much risk you are prepared to accept, however there are different levels of risk - investment ISA’s and investment bonds run with the markets, whilst options such as savings bonds and high interest accounts offer fixed rate solutions.

Sarah Maple writes about the best savings accounts and fixed rate bonds.

How to Save for a Gap Year You’ll Never Forget

A gap year spent working or travelling overseas offers school-leavers or graduates the perfect opportunity to enjoy sun, sea, sand and adventure, before going to university or settling down to the world of work. So whether you fancy an extended holiday or a job volunteering for community or environmental projects in developing countries, the experience will be both unforgettable and could enhance your employment prospects when you return.

Start saving early

Before you start packing your rucksack, you need to remember that globe-trotting does not come cheap; fail to budget and your gap year could soon end up running into thousands of pounds. The key to a successful extended trip is forward planning – working out how you're going to finance it is just as important as deciding where to go.

Draw up a budget

Think carefully about your finances, and draw up a list of all the big expenses you might encounter, such as transport, food and accommodation. Also take the time to research the local cost of living – a good starting point is Lonely Planet.

Build up a cash reserve

While you may like the idea of working your way around the world, it may also be worth spending some time working here in the UK before you go. This will enable you to build up a cash reserve which could be held in a low-risk savings account paying a high rate of interest.

Where should I stash my cash?

A good starting point is a mini cash individual savings account (ISA) into which you can currently save up to £3,600 a year with no tax on interest (rising to £5,100 in April 2010).

Manchester building society is offering one of the “best buys” at the moment – paying 2.75% with no bonus on its Premier Instant Isa - although this does require a minimum balance of £1,000. For smaller balances, Standard Life is paying 2.65% on its Direct Access Isa on balances of just £1.

How to Ensure Your Savings are Safe

With so much turmoil in the banking sector over the past few months, savers are feeling justifiably jittery about the safety of their hard-earned cash – but just how safe are their savings?

Many are nervous about putting their faith in savings institutions, having had their fingers burned by the collapse of the likes of Northern Rock and the Icelandic banks. And while things seemed to have settled down a little of late, there are no absolute guarantees that other banks won't go the same way.

Are my savings protected?

The good news is, if you have your savings with a UK bank authorised by financial watchdog, the Financial Services Authority (FSA), you will have protection under the UK's Financial Services Compensation Scheme (FSCS). This is the official safety net for customers of financial firms that go bust, and guarantees your savings up to a limit of £50,000 - or £100,000 for a joint account.

Don't keep all your eggs in one basket



When checking the safety of your cash, you need to note that the FSCS level of protection applies per person, per authorised institution - and not per account. This means that if you have more than £50,000 with any one bank, you need to spread your money around between different providers.

You also need to beware that some institutions offer accounts under a number of brand names or subsidiaries which are all trading arms of the same authorised institution. If there is a single registration for the entire group, your compensation is limited to a total of £50,000 protection across all of its brands.

Some examples

HBOS, for example, operates savings accounts under the Halifax, Bank of Scotland, Birmingham Midshires and Intelligent Finance brands. However, all HBOS brands operate under a single FSA authorisation, so if you have £30,000 savings with the Halifax and £30,000 with Intelligent Finance, only £50,000 of the £60,000 total would be guaranteed.

In contrast, the UK banks owned by Santander are operating under two authorisations - one covers Abbey and B&B, and the other covers A&L. This means savers are covered for up to £50,000 across Abbey and B&B, and are also covered for a further £50,000 with A&L - but be warned that this could change from the middle of next year.

You can find more information on who owns who in this FSA download.

More info found here

UK Banks Post Crunch - Who Owns Who

The financial turmoil of the past 18 months has led to a wave of consolidation in the banking industry, making it even harder to ensure you’re not putting all your eggs in one basket.

A recent article on Confused.com takes a look at today’s banking sector to find out who actually owns who on your highs street.

Why it matters

If a savings institution goes under, the Financial Services Compensation Scheme (FSCS) will provide compensation of up to £50,000 to single account holders and £100,000 for joint accounts.

However, it’s important to note, the compensation limit applies per banking licence and not per brand, meaning it’s crucial you know who owns who.

When it gets confusing

Staying within this compensation limit is not as simple as just making sure you don’t have more than £50,000 saved with one banking group.

Some banks have merged but continue to operate their bands under different banking licences. In some cases, special measures have been put in place so that merged groups are treated as having separate licences, even though they don’t.

While you won’t go wrong if you ensure you don’t have more than £50,000 saved with any one institution, you could potentially miss out on good returns if two brands within one group are operating under separate licences and both have competitive deals.

Read a guide to the big bank operators in the article

Guide to Savings 2009

Need to save cash? Which account is right for you? With Bank of England interest rates at a record low, getting the best possible return on your savings has never been more important. In today’s market, it really pays to know your ISA from your fixed-rate bond.

Follow Confused.com’s guide to savings accounts to ensure your money is in the right place…

1. Instant access accounts

These accounts, also known as no-notice accounts, enable you to get your hands on your cash without restrictions.

The most recent figures from the Bank of England show the average interest rate paid on a branch-based instant access account has slumped to just 0.17%. But don’t despair - you can get up to 15 times this amount by shopping around for the best rate. Try Confused.com when comparing savings accounts.

GOOD FOR: People who want the security of knowing they can get hold of their money without having to wait. But, you’ll pay for the privilege, as these accounts typically offer the lowest returns.

2. Notice accounts

Under these accounts you generally have to provide notice of between 30 and 120 days to withdraw your money. As a result, these accounts may not be suitable for people who think they might need their cash in a hurry, but they do tend to offer higher rates than instant access accounts.

GOOD FOR: People who are confident they could wait for the required notice period.

3. Internet accounts

The overheads involved in running these accounts are lower than on branch-based ones. This is reflected in the interest rates they offer, which are usually higher than on instant-access accounts. Internet accounts often let you withdraw your money without giving notice.

GOOD FOR: Web savvy people who need instant access to their cash but want to get higher returns than on branch-based accounts.

4. Regular savings accounts

Banks and building societies have become increasingly reliant on using savers’ money to fund mortgage lending since the credit crunch struck, and this has led to many groups launching regular savings accounts.

Under the terms of the accounts, you agree to pay in a set amount of money every month for a year, although it’s sometimes possible to vary the sum. You can’t withdraw any of the money until the end of the year, when the interest is added to it and the total is usually transferred to a lower interest account.

GOOD FOR: People who have spare cash to set aside every month and for people who need a little help with the discipline of saving. Not so great for anyone with a lump sum to invest, as the money can only be paid in on a monthly basis.

5. ISAs

The benefits of ISAs shouldn’t be underestimated in the current low-interest rate environment. Not only do the accounts typically offer higher interest than instant access and notice accounts, but holders don’t have to pay any tax on the returns they receive.

As a result, a higher rate taxpayer needs to earn 1.67% on a normal savings account just to equal every 1% they earn through an ISA, while a basic-rate taxpayer would have to earn 1.25%.
You can pay up to £3,600 a year into an ISA, and with many of the best-buy deals offering instant access to your money, it’s hard to see a downside.

GOOD FOR: People who want to save long-term and can afford to lock in money for 12 months.

For more information on ISAs, see Confused.com’s guide to tax-free savings.

6. Fixed-rate bonds

These are the accounts that are paying the best return at the moment, with many fixed-rate bonds offering interest of more than 4%.

The reason for the high rates is depositors have to lock up their money for a set period of time, generally between one and five years. Interest is either paid annually or when the investment matures.

GOOD FOR: People whose main consideration is to get the best possible return on their cash.

7. Monthly interest accounts

These tend to be notice accounts upon which the interest is paid monthly rather than annually. The rates paid on the accounts are usually slightly lower than for notice accounts, to reflect the fact you get the interest sooner.

GOOD FOR: Retired people who are using their savings to boost their income. And those hoping to live off returns on their savings, such as during a career break or maternity leave.

Log on to Confused.com to compare savings account rates.

Sourced from Confused.com [Link]

Confused.com’s Guide to Safe Savings

Top tips on how to keep your money safe. These are worrying times for savers. Not only have interest rates fallen to record lows, slashing the returns people can earn on their money, but there have also been a number of high profile banking collapses.

Unsurprisingly, many consumers have been left wondering if they wouldn’t be better off stuffing their savings under their mattress.

But, by following a few simple rules, people can easily keep their money safe, while still earning a decent return on their savings at the same time. Just follow Confused.com’s top tips…

The savings safety net

The good news for savers is that the UK has a savings safety net, known as the Financial Services Compensation Scheme (FSCS). The scheme will pay compensation of up to £50,000 to single account holders who have lost money as a result of a bank or building society going under, and up to £100,000 for joint accounts. The scheme currently pays out within three months, and there is talk of speeding this up to as quickly as seven days.

Banks versus brands

However, things can get a bit complicated. The FSCS will only guarantee up to £50,000 or £100,000 per banking licence and not per brand. As a result, those who have more than this amount in savings with different brands - which are part of the same banking group - could still lose out if their bank goes bust. It’s therefore important to ensure that your money is spread around different banking groups and not just different brands.

Things have been made particularly complex by the recent wave of consolidation in the banking industry. For example, Lloyds TSB and HBOS are now part of the same banking group, but continue to trade under different banking licences, meaning they have separate compensation limits under the FSCS. But Halifax, Bank of Scotland, Birmingham Midshires and Intelligent Finance all trade under the same licence.
Similarly, Abbey, Bradford & Bingley and cahoot are under the same licence, while Alliance & Leicester is under a different one, although they’re all owned by Spanish banking giant Santander.

Government Guarantees

For people who are worried about the safety of their cash, there are a number of institutions that have government guarantees.

National Savings and Investments is backed by the UK Treasury, which sees the group boasting that it’s 100% secure, while Northern Rock has also been nationalised – making it similarly secure.
All money invested in Irish banks is guaranteed by the Irish government, including money that is held in the UK arms of Irish institutions. As a result, the Irish government guarantees any money held in Post Office savings accounts, as the accounts are provided through a joint venture with the Bank of Ireland.

5 top tips to keep your money safe

1. Spread your cash around. Even if you don’t have more than £50,000 worth of savings, it’s still worth holding it with different institutions, just in case the worst happens, and you’re left without your money while you wait for the FSCS to pay out.
   
   
2. Check your savings provider is covered by the FSCS or a similar foreign scheme. All savings providers, authorised by the Financial Services Authority in the UK, are covered by the FSCS. Some foreign providers may also be covered by the scheme, while others will just be covered by their home country’s scheme, which in some cases could pay out less than the FSCS.
   
   
3. Make sure you know who would refund your money if things went wrong and how much you’d get back. The easiest way of establishing this is to simply ask your bank.
   
   
4. Make the most of the security offered by government-backed institutions.
   
   
5. Take advantage of the savings guarantees being offered by the Irish government.

While it’s important to keep your money safe, savers should still try to get the best returns on their cash. Compare savings with Confused.com to make sure your money is working hard for you.

Sourced from Confused.com [Link]

ISAs: A Guide to Tax-Free Savings

Making the most of your annual ISA allowance. As interest rates dive to record lows, there’s never been a more important time to get the best possible return on your money. Key to doing this is ensuring you don’t hand over more cash to the taxman than you have to.

But does that mean investing in an offshore tax haven or working out a tax avoidance scheme? Not at all. Tax-free savings simply means making the most of your annual ISA allowance. Read this guide for more information...

What is an ISA?

ISAs, or Individual Savings Accounts, were introduced in April 1999 to enable people to save a certain amount of money each year without having to pay tax on the gains they make, or the interest they earn.

In other words, ISAs are an incentive for you to save.

Savings levels

Consumers can currently save up to £7,200 each tax year into an ISA. They can either invest the full amount into stocks and shares, or they can save up to £3,600 in cash, with the remaining balance invested in shares.

No tax is paid on the interest earned through cash ISA savings, while any money built up in an equity or shares ISA is free of capital gains tax, although a 10% tax is still automatically charged on any income from share dividends.

Is it still worth it?

Historical data from the Bank of England shows that the average returns paid on ISAs are typically higher than on other savings accounts, and this is before the tax advantage.

But more importantly, paying tax on savings actually eats into the returns you’re getting. For example, a higher rate taxpayer needs to earn 1.67% on their savings just to equal every 1% they earn through an ISA, while a basic rate taxpayer would have to earn 1.25%.

As a result, a higher rate taxpayer would have to find a rate of 5.01% on a normal savings account to equal an ISA rate of 3%. In the current climate, returns of 5% are hard to find, showing the benefits of using an ISA.

Although the tax-free returns benefit may not seem huge when you’ve saved only one year’s worth of the allowance, it will be fairly significant by the time you’ve tucked away £3,600 a year, plus interest, for 10 years!

Where to get an ISA

As with other savings accounts, shopping around for the best rate is key. You can find a selection of cash ISAs and shares ISAs on the Confused.com ISA page.

You can only pay into one cash and one shares ISA each tax year, so it pays to pick a good one.

If you already have an ISA but are worried that it’s no longer offering the best returns, you can move your savings into a new account. But it’s important you get your existing provider to transfer the funds for you. This will ensure you don’t lose the ISA status on the money you’ve already saved.

It’s also possible for people to transfer the money they’ve saved in a cash ISA into a shares one, although money in a shares ISA can’t be transferred to a cash one.

Sourced from Confused.com [Link]

Guide to Maternity Pay 2009

Know your rights before you go on maternity leave- If you’re a new parent, it can be tricky managing that work/life balance with the demands of paying off your credit card and household utilities.

Therefore, it’s important to know exactly what pay you’re entitled to when you go on maternity or paternity leave. Confused.com’s guide will help you to know your rights.

Statutory pay

In a nutshell, if you’ve been employed by your current company for 26 weeks by the time you are 15 weeks away from giving birth and you’re earning more than £90 a week, you’re entitled to Statutory Maternity Pay from your employer.

If you’re unemployed, or have been in your current job less than 26 weeks, you’re entitled to Maternity Allowance, which is paid by the state.

You can claim Statutory Maternity Pay (SMP) for up to 39 weeks but you need to tell your employer at least 28 days before the date you wish to start claiming. The earliest you can take it is 11 weeks before your baby’s due.

SMP is calculated at 90% of your average weekly earnings for the first six weeks, then up to £117.18 (£123.06 from April 5, 2009) for the remaining 33 weeks.

Company pay

The amount you get from your employer depends on whether the company has its own maternity pay scheme.

Check with your HR department for the exact details, but some companies pay your full salary for the first six weeks of maternity leave and offer extras after that.

If you can’t get SMP from your employer, you may be entitled to the Maternity Allowance, which is £117.18 (£123.06 from April 5, 2009) for up to 39 weeks.

Tapping into extra benefits

You’re entitled to take up to 52 weeks’ maternity leave in total. If your baby was born after October 5, 2008, your employer must continue to give your contractual benefits, e.g. gym membership, and your pension throughout your leave.

And to stay up-to-date with office life, you can take up to 10 ‘Keep In Touch’ days, allowing you to come into work during maternity leave.

Your employer may also offer a return-to-work bonus, which you can get as a lump sum when your leave ends. There may also be childcare vouchers and flexible working schemes available, which can help to ease you back in.

Government boosts

There are a number of financial benefits from the Government for expectant and new mums, which help with the costs of bringing up a baby. So you don’t have to rely too heavily on your savings.

From April 2009, all mums-to-be can claim a one-off tax-free payment of £190, called the Health In Pregnancy Grant. Once you’re more than 25 weeks pregnant, you can get a claim form from your midwife, who will confirm your due date.

Alternatively, if you, or your partner, are on Income Support or receiving a Jobseeker’s Allowance, you’re eligible for the Sure Start Maternity Grant - a one-off tax-free payment of £500 to help with the cost of bringing up your child.

Benefits from birth

Once your baby’s born, you might be entitled to tax credits if you work, but earn a low wage. Any parent with children under the age of 16 can claim a Child Benefit. This gives £20 a week for your eldest child and £13.20 a week for each child after that.

If you’re already receiving a benefit or you’re pregnant and under 18, you could qualify for Healthy Start vouchers, worth £3 a week. These can be used to buy milk, fruit and veg.

Find out more about these benefits and exactly what you’re entitled to at www.directgov.uk.

Taking paternity leave

For all those expectant fathers, when your other half gives birth, you might be able to claim Statutory Paternity Pay (SPP) from your employer.

To qualify, you must be the biological father or be taking responsibility for the child’s upbringing. You must earn more than £90 a week and have been working for your employer for 26 weeks by the 15^th week before the baby’s due.

After telling your employer you plan to take leave, you can take two weeks of SPP, which is £117.18 per week or 90% of your average weekly earnings if this is less.

Before baby arrives

Sorting out your maternity and paternity pay is one of the many things to do before your baby arrives. Then there’s the shopping list: prams, baby clothes, car seats, toys – your credit card could be in overdrive!

So set some time aside to sort your finances. Have you cleared your credit card? Are you on top of mortgage payments? Compare all of these and sign up for a great deal with Confused.com.

Once that’s done, it’s time to think about savings. If you’re pregnant or planning a family and are currently in full-time employment, the drop in wages can be hard to swallow when you decide to leave and bring up a baby. So as soon as you possibly can, you may want to consider making time to get a good savings account or ISA and stash as much cash in it as you can!

Sourced from Confused.com [Link]