There is some €25bn in deposits in the two banks, mostly consumer savings.
Consumers with savings in KBC and Ulster Bank have been advised to review their financial position and consider if keeping their savings on deposit is the most efficient use of their cash.
There is some €25bn in deposits in the two banks, mostly consumer savings. KBC deposits are due to transfer to Bank of Ireland, with Ulster Bank savings likely to go to Permanent TSB.
Customers with savings in the two banks will see their money transferred if they do nothing.
This was a regulatory priority to ensure that there are no customers who are left without a bank if the exiting banks close accounts and send cheques to customers.
The acquiring banks will likely need some of the deposits. Firstly, deposits fund loan books so to the extent that large loan books are transferring the acquiring banks will have a preference for deposits to transfer – there is also the consideration that on the retail side that the acquiring banks will, from a customer relationship side, want the retail deposits and current accounts.
€10.7bn of the Ulster Bank deposits were held by consumers. KBC does not provide a break-down but it is assumed most of its deposits are retail.
The acquiring banks are unlikely to widen the thresholds for imposing negative interest, despite the system being awash with cash.
The transfer of accounts is a good opportunity for consumers to review their financial position and consider if keeping their savings on deposit is the most efficient use of their cash.
Instead of opting for another deposit account consumers would be wise to also look at paying down expensive debt, pay off their mortgage if they are not on a tracker, boost their pension and ensure they have an emergency fund of six months of living expenses.
Consideration could be given to State Savings products, which are State guaranteed, have no explicit charges or negative interest and are exempt from DIRT (Deposit Interest Retention Tax) tax.
The main advantage of investing with the State is that you won’t have to pay DIRT (currently 33pc) on any returns that you make. However, the rates on offer are pretty meagre and have recently been reduced even further so savers shouldn’t expect a windfall.
The 10-year National Solidarity Bond offers a return of 0.96pc interest a year, or 10pc in total over the whole 10-year term. Placing money in a five-year Savings Certificate will generate 0.59pc a year, or 3pc over the five-year term. With inflation currently negligible, your savings will at least be making a small return in real or inflation adjusted terms. These returns are still better than anything you’d get with a bank right now with the bonus of not having to pay tax.
If we can help in any way, or you have any questions on other Savings & Investment opportunities and Cash Alternative investment, please feel free to contact any member of the Seaspray Team.
Tel. +353 1 7070 000
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