Q MY PARENTS are an elderly couple in their 70s, who have An Post certs maturing after 15 years.
They have the option of reinvestment with a guaranteed return of 21 per cent tax free over five years and six months, equivalent to an average rate of 3.53 per cent if held for the full term.
They do not wish to tie up their money for this period. Can you advise a safe, secure investment where interest would be earned on a yearly basis?
Mr A.McG, Galway
A An Post savings certificates have their merits - particularly the backing of a State guarantee - but in the current environment of rising interest rates, they are not competitive.
For people in your parents' position, there is another drawback - the money is locked in for 5½ years. That's fine for youngsters, where you're often keen that they can't squander their savings on the first fancy to cross their line of vision but, for elderly people, who may well need access to funds at shorter notice, it is a significant drawback.
At the moment, there is a range of deposit accounts for lump sums offering interest rates of more than 5 per cent. If you are prepared to leave the money on deposit for one year, you can achieve rates of up to 5.1 per cent at Irish Nationwide, with National Irish Bank, Halifax and Anglo Irish Bank close behind.
Online providers Rabobank (5.15 per cent) and Northern Rock (5.05 per cent) also offer attractive rates, although this option depends on whether your parents are comfortable with the idea of online banking.
Deposit Interest Retention Tax (Dirt) may eat into these interest rates if your parents have income above the exemption threshold - which for a pensioner couple would be €38,000 - but, even then, these accounts would offer interest rates of more than 4 per cent after Dirt.
If you want instant access to your funds, Anglo Irish bank (4 per cent) and National Irish Bank (3.9 per cent) offer the most competitive options for lump-sum savings.
The other option would be to deposit the funds in one of the above banks and then dripfeed them into a regular saver account, some of which are offering rates as high as 8 per cent - although monthly deposits are generally limited to a maximum of €1,000.
Details of bank deposit offerings are available on the financial regulator's consumer website, www.itsyourmoney.ie.
Click on the "Cost Comparisons" tab on the homepage and select the type of product you want from the drop-down menu.
Q I have accumulated in principal and interest paid Post Office bonds and certificates to the value of €68,000. Am I obliged to inform the tax authorities?
Mr M.L, Dublin
A There is no reason for you to disclose these investments to the tax authorities. Your only obligation, at present, is to notify the Revenue of any income you receive and the appropriate tax computed on that.
I imagine your concern arises from the news that the Revenue is going to start inquiring into the source of funds deposited in banks and other financial institutions - where those funds exceed €100,000.
The only purpose of this is to ensure that the original deposits came from "clean" funds, ie money on which tax had been paid where appropriate.
People who may not have paid income tax, capital acquisitions tax or whatever on the money sitting in their savings have been given until January 1st, 2009, to own up to the Revenue and settle their affairs - a three-month extension on the original September deadline. Those whose affairs are in order have no need to worry - or to file any declaration.
Of course, the Revenue could subsequently contact you or anyone else regarding their savings, but the truth is that this is unlikely in your case. The Revenue will be looking for substantial lump-sum deposits, whereas your savings appear to have been accumulated over many years.
Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice.
