Can You Afford To Invest In A Deposit Account?

27 May 2019

We are living in times of historic low interest rates for savers and the general consensus is that the downward trend for deposit interest rates in Ireland looks set to continue. Presently, the most competitive 12 month fixed term deposit interest rate available in the Irish market is 0.5% per annum gross/AER 0.5%. After deduction of DIRT Tax, currently 35% of the interest earned, the net return on an investment of €25,000 would be €81.25, which is less than €7 per month.

Investors are continually asking the question – “Is there anything else out there where I can invest my money”?

If you can leave your hard earned savings invested the answer could be an Investment Bond offered by a Life Assurance Company. There are six Life Assurance Companies active in Ireland, all offering unit linked investment funds where the savings of thousands of like-minded investors are pooled and invested in order to generate growth.

Generally, you should be in a position to leave your money invested for 5 years or longer; however, these types of investments are open ended with many allowing penalty free access to your savings if needed. You can make partial or full withdrawals as required and are only taxed on the investment growth when you make a withdrawal. Your savings will grow tax free; however, tax will be deducted if you have not made a withdrawal before the 8th anniversary of your policy. I would not recommend a unit linked investment fund if you plan to use your savings in the short term.

The prime consideration for a potential investor is that you have no guarantee to your capital or potential returns and the value of your savings will fluctuate. However, historic performance has shown that by investing for the medium to longer term you are likely to significantly improve the returns generated compared with deposit accounts.

If longer term growth appeals to you, a risk assessment should be completed with you and based on your attitude to risk, your objectives and investment term, a personalised recommendation will be provided to you.

Traditionally, investors have invested in funds that participate heavily in stock markets to generate returns above cash. There are numerous different asset classes in which you can invest, such as equities, bonds, property, commodities and fixed interest as well as multi asset and absolute return funds. All funds are risk rated allowing you to invest in funds rated low to high risk or somewhere in between. You can invest in a single fund or multiple funds within one policy, allowing you to further diversify between asset classes and risk.

All of the Life Assurance Companies offering these funds allow a number of free switches between their funds each year, meaning as the broader world economy changes you have the opportunity to alter your investment strategy and reduce or indeed increase your risk.

A Qualified Financial Advisor will guide you on the investment funds available from the Life Assurance Companies in Ireland.

Robert Downes QFA RPA is a Qualified Financial Advisor. You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on

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