June 7, 2020

It costs you money to hold a deposit account

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Recently, Rabobank Ireland announced that with effect from the 5th September they will be reducing their Gross Interest Rate on demand deposits over €20,000 from 2.40% Gross to 2.15% Gross. This is only to be expected with the ECB rate being cut by 25 basis points. Nevertheless at first glance it appears to be a reasonable rate when you consider that Rabo is a AAA rated bank. While other banks in Ireland are offering higher rates, their credit rating is usually much lower, in many cases, BBB.

So it seems like a straight trade off for rate v risk? Not quite! Once Deposit Interest Retention Tax of 30% is factored in and the current Retail Price inflation rate of 1.7%p.a. as at the end of June, all things being equal, Rabo will be offering many savers a negative real return on deposits in the Autumn. This means that if you are with Rabo or other banks with similarly low rates of deposit interest you should review your deposit accounts as the other banks are likely to follow Rabo’s move.

If either you or someone you know needs to revisit  low risk options, feel free to contact us for a consultation. As a certain advertisement for a well known supermarket goes, every little helps!

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June 7, 2020
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