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RodCrosby2

Post Office - Security And Effectively Instant Access?

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Thinking of putting a big wedge (>£100k) in the latest Post Office three year bond when it is announced tomorrow. [the last one had a rate of 4.1%]

I have been told the following by the PO.

i) until September 2010, unlimited deposits will be protected (indefinitely) by the Irish government guarantee, then it will reduce to 100k Euros.

ii) the early redeption penalty, known as the "breakage fee" is effectively zero (at the moment), due to the low "replacement market rate" (LIBOR?), and the calculation detailed in paragraph 49 of the information booklet.

Is this true, or is there a catch?

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Thinking of putting a big wedge (>£100k) in the latest Post Office three year bond when it is announced tomorrow. [the last one had a rate of 4.1%]

I have been told the following by the PO.

i) until September 2010, unlimited deposits will be protected (indefinitely) by the Irish government guarantee, then it will reduce to 100k Euros.

ii) the early redeption penalty, known as the "breakage fee" is effectively zero (at the moment), due to the low "replacement market rate" (LIBOR?), and the calculation detailed in paragraph 49 of the information booklet.

Is this true, or is there a catch?

I am reminded of the quote "if something sounds too good to be true then most likly it is not"

A bit like electricity and water Irish republic and money are a mix to handle with care.

Icesave anyone?

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Post Office's saving schemes use different providers.

Don't assume your money with the Post Office is looked after by NS&I.

Isn't the Post Office 3 year growth bond with Bank of Ireland? You're happy to have a full £100K looked after by Bank of Ireland.

http://www.postoffice.co.uk/portal/po/content1?catId=19300235&mediaId=52900695' rel="external nofollow">

Post Office® Instant Saver, Growth Bonds,Reward Saver and Maturity Accounts provided by Bank of Ireland.

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Just off the top of my head, because the Post Office accounts are guaranteed by the Irish government which has a more generous compensation scheme than the UK FSA scheme, you would not be covered at all by the FSA compensation scheme.

Whilst your money will be backed by the Irish government, I wouldn't rely on them to make good on that guarantee when/if things do truly go wrong. Politically, if the Irish govt has to choose between who to bail out and who to leave high and dry, they will prefer Irish voters over those based abroad (i.e. UK Post Office investors).

I wouldn't deposit money with the Post Office, basically.

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Barring an Argentine-style scenario, surely the PO guarantee is as good as it gets. It appears to be twofold:- the Irish Deposit Guarantee(to e100k), and the Irish Government Guarantee (unlimited for deposits taken prior to 29 Sep 2010)

What happens after the additional Irish Government guarantee arrangements expire?

The protection offered by the Irish Deposit Guarantee Scheme does not expire. When the additional Irish Government guarantee arrangements (which fully guarantee all savings held in Bank of Ireland) expire, savings customers will still continue to be covered by the €100,000 cover provided by the on-going Irish Deposit Guarantee Scheme.

http://www.postoffice.co.uk/portal/po/content1?catId=19300232&mediaId=92400749#55300282

Irrespective of Irish ownership and Irish guarantees, do you really think the British government would let the British PO go down the pan? Large parts of the benefits system are administered by the PO, don't forget...

Anyhow, to the second part of my question the "instant access" bit.

Paragraph 49 gives the formula for the breakage charge.

P x (R-D) x T

------------------

36,500

where

P = amount withdrawn

R = "replacement market rate" [i was told this is LIBOR]

D = Fixed Rate on the Bond

T = remainder of fixed term in days.

If, at the time of the withdrawal, the replacement market rate is below the rate on the Bond, a nil breakage Charge will be charged.

So, the replacement rate seems to be below the bond rate at the moment. Even if it wasn't, the breakage charge would be negligible. Therefore, it's effectively "instant access"???

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Barring an Argentine-style scenario, surely the PO guarantee is as good as it gets. It appears to be twofold:- the Irish Deposit Guarantee(to e100k), and the Irish Government Guarantee (unlimited for deposits taken prior to 29 Sep 2010)

http://www.postoffice.co.uk/portal/po/content1?catId=19300232&mediaId=92400749#55300282

Irrespective of Irish ownership and Irish guarantees, do you really think the British government would let the British PO go down the pan? Large parts of the benefits system are administered by the PO, don't forget...

Anyhow, to the second part of my question the "instant access" bit.

Paragraph 49 gives the formula for the breakage charge.

So, the replacement rate seems to be below the bond rate at the moment. Even if it wasn't, the breakage charge would be negligible. Therefore, it's effectively "instant access"???

Irrespecive of what is written my gut feeling would be to give anything to do with the irish euro economy a wide birth, the sh1t is about to hit the fan again in coming months aka soverign debt.

I would give the euro and is users a 50-50 chance of going under......apart from Germany of course.

My tip of the week is look to Norway Krona buy reduced sausages and cut your fuel bills.

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I opened a Norwegian Krona account at HSBC last year when it was 10.5-ish to the pound, although I didn't transfer any money at that point because I had a look at the 'Big Mac index', which looks at purchasing power parity. On this measure, the Krona is the most overvalued curreny in the world - not exactly scientific, but enough to scare me into backing out of transferring money. Anyway, fast forward 18 months and it turns out that transferring a substantial amount in to Krona at that time would have been the right thing to do.

Hindsight's great.

Norway will be fine, but I still think the currency looks overvalued.

Edited by WageslaveX14

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I opened a Norwegian Krona account at HSBC last year when it was 10.5-ish to the pound, although I didn't transfer any money at that point because I had a look at the 'Big Mac index', which looks at purchasing power parity. On this measure, the Krona is the most overvalued curreny in the world - not exactly scientific, but enough to scare me into backing out of transferring money. Anyway, fast forward 18 months and it turns out that transferring a substantial amount in to Krona at that time would have been the right thing to do.

Hindsight's great.

Norway will be fine, but I still think the currency looks overvalued.

Apology to original poster and to bring the thread back to point, as you might have worked out a number of us dont reckon the irish republic or the euro is stable nor capible of pay back should the worst happen, which it may.

Hence your decision should be in the light of risk and other options available, to my mind 100k presents risk! many other options available how about spreading it about different but safe.....whatever your choice

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Apology to original poster and to bring the thread back to point, as you might have worked out a number of us dont reckon the irish republic or the euro is stable nor capible of pay back should the worst happen, which it may.

Hence your decision should be in the light of risk and other options available, to my mind 100k presents risk! many other options available how about spreading it about different but safe.....whatever your choice

Adding some grist to t'tmill

http://www.marketwatch.com/story/ireland-sovereign-default-insurance-cost-rises-2010-08-16

Irish soverign debt insurance on the up on the back of worries over the nations banking sector!

I never quite understood how the Irish got hold of the Post Office Savings arm........buyer beware!

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  • 145 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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