Q – I have € 15,000 to invest – a present from my mother-in-law for our new son born on Christmas Day. Don’t really know what to do with this as rates are still so poor at the moment. Maybe buy prize bonds buy on the stock market ? Thanks. Catherine – Raheny Dublin 5
A – Congrats on the new son Catherine – the money will be tax exempt first of all to you or your son. The gift can be deemed part of his Capital Acquisition Tax threshold of € 335,000 from parents to son. If it is to your in-laws’ grandchild, the exemption is € 32,500, so no tax liability there either. As regards investing, there are a number of factors that must be considered in making investment decisions. If you want growth, you MUST take some risk. As you stated, interest rates are poor ( best demand account currently –0.1% – net 0.067% after 33% DIRT tax – while best rate is NTMA’s 10 year National Solidarity Bond offering 22% on maturity. Both interest and capital are guaranteed by the government. Minimum is € 500 and maximum € 120,000 but grossed up equivalent to an annual gross rate of 3% each year. So any alternative that has the potential to at least double the best interest rate available should be considered. As regards Prize Bonds, you are subject to the vagaries of chance. While you DO have a greater chance than the Lotto, those chances of winning are still slim but your stake is guaranteed… Prize Bonds are a good option in a balanced portfolio, a little like going to the bookie, making a bet knowing you’re going to get your stake back. Quaint ! Best of luck and what a nice mother in law !