AW writes from Dublin: I have instalment savings and a deposit account at An Post that I use to pay my college fees for a son studying in Britain. I was horrified to read your view that State Savings could be at risk if Ireland defaulted on its national debt (Risk management, May 27). Could you advise on the safest place for my meagre savings?
It certainly wasn’t my intention to horrify anyone. Those with money in State Savings need to realise, though, that they would be in a very uncertain position if Ireland was to default because their savings form part of the national debt.
Default would probably be the result of Ireland leaving the euro or if the currency union broke up. Reverting to a national currency would almost certainly result in severe devaluation of Irish savings, even those that do not form part of the national debt.
The difficulty for savers in Ireland, Greece, Portugal and other weaker, peripheral eurozone countries is that nobody knows whether the euro is going to survive or whether some members will have to exit the club.
Only you can decide whether you are willing to live with the risk of leaving your money in An Post. One precaution would be to move some of your savings to a deposit account in a stronger eurozone country such as Germany.
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You might also consider moving your savings into sterling to the extent that they will be used to pay for your son’s education in Britain. I would not normally advise savers to speculate on sterling or other foreign currencies. You are a special case, though, because a lot of your expenses are in sterling, protecting you from currency risk.
It is not necessary to go to Britain or Northern Ireland to open a sterling account. Nationwide UK (Ireland), based in Dublin, pays 1% interest on easy-access sterling deposits. Fixed sterling deposits earn an annual rate of 1.25% for six months or 1.5% for 12 months.
Silver lining
TF writes from Navan: What is your opinion about investing in silver? Are there any silver dealers in Dublin? How can investors be sure that the silver is genuine?
Silver is both an industrial and a precious metal. Like gold, it has a long history as money, as well as having uses in jewellery and tableware. It also has many industrial uses, which is why its price tends to be more volatile than gold.
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The euro price of silver has fallen by more than 14% in the past year, a reflection of slowing demand, while the euro price of gold is up by more than 16%, although the price has been volatile.
Gold, unlike silver, is seen as a hedge against the uncertainty about the strength of currencies such as the dollar and sterling. They are being devalued by central bankers who are printing money in order to prop up banks and devalue their country’s enormous debts through inflation.
Do your research carefully before buying silver or gold. Check goldprice.org for current and historic prices. Compared with its all-time high of €32.71 an ounce on April 22, 2011, silver looks like a bargain at its current price of €22.62. If the global economy keeps slowing, though, it could fall further, perhaps even returning to the value of about €10 it had five years ago.
The data on goldprice.org tells us nothing new about the precious metals themselves, whose intrinsic nature never changes. It simply shows how many paper euro, dollars or pounds it takes to buy an ounce of these rare and precious metals.
Only buy silver and gold from reputable bullion or coin dealers. Goldcore.com is a well known bullion dealer in Ireland and a franchise-holder for the Perth Mint Certificate Programme of Western Australia. I purchased gold and silver certificates through it in 2006.
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Crash course
MMcI writes from Dublin: I have a large amount on deposit in one bank following the sale of a house in 2004. I naively thought the deposit was covered by the government’s eligible liabilities guarantee (ELG). I am terrified that, in the event of a crash, I could lose my money.
I am arranging to move funds elsewhere. I would welcome your advice on transferring €100,000 to RaboDirect. Where could I find out more about banks’ credit ratings? What about moving some money to KBC Bank in Luxembourg, or to Deutsche Bank or DZ Bank in Germany?
The ELG covers individuals’ savings greater than €100,000 in four institutions — Allied Irish Banks, Bank of Ireland, EBS and Permanent TSB. It is due to expire on June 30, but may be extended until the end of the year. If you open a fixed-term account in one of these banks before June 30, the ELG will cover your savings for up to five years.
RaboDirect is not part of the ELG. Its deposits in Ireland are protected by the Dutch deposit guarantee scheme up to €100,000 per customer. Luxembourg and German banks also offer a €100,000 deposit guarantee, underwritten by their respective governments.
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Credit agencies have been downgrading all European banks. Standard & Poor’s removed Rabobank’s cherished AAA credit rating last year. It is now ranked AA by Standard & Poor’s and Fitch, and Aaa by Moody’s. Deutsche Bank’s long-term ratings are A+, A+ and Aa3 from the three agencies. KBC, a Belgian bank, is rated A-, A- and A1, while its bank in Ireland is rated Baa3 and BBB by Moody’s and S&P.
In the event of Ireland leaving the euro, you would be sheltered from the inevitable devaluation that would result by having some of your savings on deposit in the “strong” core eurozone members such as Germany, the Netherlands or Luxembourg.
Jill Kerby is co-author of the TAB Guide to Money, Pensions & Tax 2012. Email her at the address below or write c/o Money Matters, The Sunday Times, 4th Floor, Bishop’s Square, Redmond’s Hill, Dublin 2, giving a telephone number. Do not send original documents or SAEs. Advice is offered without legal responsibility