With January traditionally the month when cash is at its tightest - it's probably not the time of year when most of us wonder where we're going to put that spare €15K we have lying around. But we haven't always travelled the straight road at bonkers.ie, and we did start our bank account review series back in December after all...
We kicked off with demand deposit accounts because we crunched the search numbers on bonkers.ie and it was clear that most people want the type of savings account where you can get at your money whenever you want and still earn a bit of interest. In our opinion, the Best Value Demand Deposit Account was RaboDirect’s Online Savings On-Demand.
People have different preferences though. Some are happy to lock their money away for a while with the understanding they will earn more interest on their savings. For those who are looking for this type of account, named a Term Deposit account, our numbers show that more than half of all those searching for a Term account are looking for a 12 month account, even though terms of up to 10 years are available.
So for this review, we will concentrate on one year term deposit accounts only, because more than half of all people searching for term accounts on bonkers.ie are looking for a commitment of one year or less.
Banks have finally recognized what savers knew all along: people don’t like long terms, so now they are all competing in the one year space. And most of them have accounts that pay around 3 per cent - which is the 12 month Term account battleground. In fact, longer terms which should offer better returns now offer lower rates of interest than typical 12 month term accounts.
This type of account offer a fixed rate of interest. So the bank can’t suddenly decide to halve your return half way through your term - which is important if you want to know exactly what your return will be, and not have to run the gauntlet of a variable rate which might fluctuate throughout the year. One interesting side-effect of a fixed return on your savings is that the bank also knows the amount you will earn over the term, which some bright sparks have used to their advantage in creating a Term account which pays interest in advance - that’s right, before the term is up!
One thing to note about term accounts is that banks love them. But that doesn’t mean you shouldn’t too. Why do banks love ‘em? You lock up your money with them for the agreed amount of time, giving the banks access to work your money to their benefit; the bank is hoping they can get a higher return on your money than they will need to pay out to you at the end of the term.
So back to our review of Ireland’s Best Term Deposit Accounts. We’ll be basing our analysis on the same deposit amount as last time - €15,865. We didn't pluck this number out of the air though! It's actually half of the average amount in overnight accounts in Ireland. This time the search preferences are for a Term deposit with an amount of €15,865 locked away for a period of one year. In all cases, we calculate the interest earned both before and after DIRT (currently at 33%). So in no particular order the contenders are:
KBC – 12 Month Fixed Rate Account
The good
- A very good 3.0% AER
- Earn up to €476 before DIRT, €319 after DIRT
- €3,000 minimum deposit; €1,500,000 maximum
- Withdraw up to 25% of your deposit during the term without penalty
- Physical branches - KBC has two branches in Dublin and one in each of Cork, Limerick and Galway
The not so good
- No online access - if you want your money you need to fill in a form
- Small branch network meaning access is restricted; no cash handling facility at branches
We say...
We like it because you can make one withdrawal of up to 25% during the term without affecting your interest or paying a penalty.
KBC – Interest Upfront Savings Account
The good
- A very good 3.00% AER
- Earn up to €476 before DIRT, €319 after DIRT
- Interest payment is made by electronic transfer 16 days after you fund your account
- €3,000 minimum deposit, €1,500,000 maximum
- Physical branches - KBC has two branches in Dublin and one in each of Cork, Limerick and Galway
The not so good
- No online access - if you want your money you need to fill in a form
- No further withdrawals allowed during the term
- Small branch network meaning access is restricted; no cash handling facility at branches
We say...
This account offers the same rate of interest at the standard KBC 12 month term account, however it takes advantage of the fact that the interest earned is known in advance - and KBC will pay you the full year’s interest in advance. This is a very neat idea and means that you can have the benefit of the full interest payment before the 12 month term matures.
Permanent TSB – One Year Interest First Deposit Account
The good
- An excellent 3.06% AER (assuming you reinvest the upfront interest. 3.00% AER otherwise)
- Earn up to €485 before DIRT, €325 after DIRT at the 3.06% AER
- Interest payment is made in the first month, if not reinvested with PTSB, the original deposit will earn a rate of 3.00% AER
- Unlimited maximum deposit for personal customers
- Physical branches - PermanentTSB has a network of branches throughout the country
The not so good
- Restrictive €10,000 minimum deposit amount.
- No withdrawals allowed during the term without penalty - if a withdrawal is made an early withdrawal charge will apply and the account will be closed
- To earn the headline rate of 3.06% AER, customers can’t take their “interest first”, they need to leave it on deposit with Permanent TSB. For those who opt to take their “interest first” they will still earn a rate of 3.00% AER
We say...
Permanent TSB invented the type of account where they pay the full year’s interest in advance. This is a nice original idea and means that you can have the benefit of the full interest payment before the 12 month term matures. This account pays a very strong 3.00% AER in interest, or if you reinvest the interest upfront, the aggregate rate increases to 3.06% AER.
Ulster Bank – 12 Months Fixed Term Deposit Account
The good
- A very good 3.00% AER
- Earn up to €476 before DIRT, €319 after DIRT
- Maximum balance of €500,000
- Online banking facility with Ulster Bank’s Anytime Internet Banking
- Physical branches - Ulster Bank has a network of branches throughout the country
The not so good
- €15,000 minimum deposit - the highest minimum of the accounts reviewed
- No withdrawals allowed during the term without penalty - if a withdrawal is made an early withdrawal charge will apply and the account will be closed
- A linked Service Account is required - if you do not operate an instant access account with Ulster Bank (such as a current account or Easy Access Savings Account) in the same name as the Fixed Term Deposit, you are required to open an alternative instant access account also.
We say...
This is a very decent account offering a more than respectable 3.00% AER. Although the account does not offer interest upfront, it is not an Achilles heel as the savings rate remains comparatively strong. This account is a strong account from a strong bank and would especially suit those customers who already bank with Ulster Bank for their daily banking requirements. It is open to everyone however, so is definitely worth a look.
Special Mentions
AIB Direct Deposits (formerly Anglo Irish Bank)
- 2.80% AER
- €1 minimum deposit, €1,000,000 maximum
Nationwide UK (Ireland) – 12 Month Fixed Rate Account
- 2.75% AER
- €3,000 minimum deposit, €2,000,000 maximum
- This account was almost a contender. It had a much better 3.05% AER until this week when the rate dropped to 2.75%. Could Nationwide UK be the first in a general rate drop across all banks?
Danske Bank 1 Year Fixed Term Deposit Online
- 2.75% AER offered to eBanking customers
- €2,000 - €999,999 (reduced rates available for amounts over €1,000,000)
EBS 12 Month Fixed Savings Account
- 2.70% AER
- €10,000 minimum deposit with no limit for personal customers
So where are our pillar banks in the mix?
The pillar banks are not too far behind in terms of savings interest offered to customers for 12 month term accounts.
The strongest rate offered by a pillar bank is with AIB Direct Deposits, but this isn't really an AIB account. AIB Direct Deposits is the new name for the old Anglo Accounts. You can't use the AIB branch network or AIB's Internet Banking if you open one of these accounts. Still, it has the AIB name and a good rate so it should to be of interest to some.
Bank of Ireland’s best one year term deposit is the 365 12 Month Fixed Term Deposit Account which offers a reasonable 2.35% AER with a €10,000 minimum deposit. This term deposit is only available through 365 phone and 365online banking - meaning you must be an existing Bank of Ireland 365 customer to qualify.
What about last month's demand deposit account winner?
RaboDirect won our December award for best demand deposit account with their excellent Online Savings On-Demand account. Unfortunately, they don't seem to be competing in the term account space at all. Their 1 year term account offers a rate of just 0.20%.
So which account offers the best value? Here’s our view:
With so many 12 month term deposit accounts out there, to be in our top three an account really needs to be offering 3.00% AER or more, which knocked out AIB, Bank of Ireland and EBS. And in a twist of timing, Nationwide UK Ireland has just dropped their 12 month term account rate from 3.05% AER to 2.75%... and thus knocking themselves out of contention.
3rd Place - Ulster Bank – 12 Months Fixed Term Deposit Account
This account is the best of the traditional terms. It does have a very high minimum which is restrictive for some, but it compensates with a strong rate of interest. Ulster Bank is a solid bank with a strong banch network.
Runner-up - KBC Interest Upfront Savings Account
This account offers the interest upfront which is excellent news for those looking for an immediate return on their money - and it is paid within 16 days of account opening by electronic funds transfer to a nominated account. An excellent rate coupled with low €3,000 minimum make this account very good value overall. KBC also has a small branch network.
WINNER - Permanent TSB 1 Year Interest First Savings Account
Permanent TSB invented the interest first account, and it’s to their credit that other banks have followed suit. This account can pay the interest within the first month of account opening - or to earn extra few quid, the interest can be left on deposit and collected at the end of the term - which is how the 3.06% AER is calculated. Those who don’t want to leave the interest in can collect a cheque or receive a deposit to their PTSB current account. A nationwide branch network, good online access, a strong rate and an interest first feature make this our pick for top one year term account.
