An overview of Individual Savings Accounts (ISA) in Ireland
Please note that these are general or the most common terms for each type of Individual Savings Account. Individual banks will have their own name for different accounts- so it's best to research via each bank's website individually to see what they all offer.
It's also going to be the case that the majority of these accounts will have minimum/maximum deposit thresholds (which will vary by account type and the bank that offers the account).
In this article we will cover the main account types that you can open within Ireland for the purpose of savings - Fixed Term, Notice, Regular Saver, Demand, - and a bit about a parent/child account for young savers. Let's get stuck right in...
The idea behind a fixed rate account is that you put all the funds in in one go, and leave it alone to mature over a certain period of time (e.g. 3 years). For doing this, you can get a higher rate of interest than you would compared to a normal savings account. The downside is that if you suddenly find yourself needing the money, then there's no way to access it (either at all, or not without penalties for withdrawing the funds early).
Different banks will over different fixed terms and interest rates depending on how long you feel you won't need to access the funds and the interest rate you'd most like to achieve. For example, Bank of Ireland offers two types of accounts - an "Advantage Deposit" where you add €5,000 and leave it for anywhere from 3 months to 2 years, or a "Growth Deposit" where you add €5,000 and leave it for 3-7 years.
A savings account where you have to give notice before withdrawing the funds. This type of account is less strict than the fixed account above - because you can access the funds without incurring any penalties. The longer you set the notice period, e.g. 3 months notice rather than 1 month, the higher rate of interest you'll be offered.
A regular savings account can be opened at any bank - just somewhere to store your savings that will give you a small amount of interest rather than leaving the funds sitting in a current account which will not gain any interest whatsoever.
Different providers (banks) offer different types of Regular Savings accounts - depending on what you plan to use the money for may make your decision easier to choose a particular account type.
Taking Bank of Ireland as an example, they offer a "MortgageSaver" which allows you to save a maximum of €2,500 a month with the option of it being a joint account, a "365 Monthly Saver" which allows you to save a maximum of €2,000 a month, offers a variable interest rate, but cannot be a joint account, or finally a "GoalSaver" which allows a maximum monthly saving of €20 - €2,000 a month.
A demand account has no stipulation that you have to give advanced warning before withdrawing the funds from the account - you can withdraw them immediately at any time. The downside of this is that you're going to get a lower rate of interest than you would with other account types.
A demand account would be more suited to a situation where you need the money for something in the very near future, but want it to gain some form of (small) interest.
Simply put, a parent/child account is one set up by the parent on behalf of the child for them to take over once they reach the age of 18. Depending on the bank, some will have varying types and criteria for the accounts.
As an example, Bank of Ireland has a "Childsave" option where the account is opened in the name of the parents and up to €10,000 can be deposited. There is also the option to open a Young Savers Current Acccount, which gives a higher rate of interest (2.5%) if the total amount of funds in the account is €5,000 or lower. Once the child reaches 13, the account is upgraded.
So which Individual Savings Account is the best of the lot?
Unfortunately, there's no straightforward answer to that one - it all really hinges on what you plan on using the money for (which decides how long you're willing to leave it alone to gain interest, as well as how quickly you'll need access to it when it comes time to use it).
If you're wanting to use it for a house deposit, then it'd be best to put whatever you save into the highest interest account that you could. However, pretty much all savings accounts are currently offering a terrible percentage of interest (anywhere from 0 to just over 2% on a regular savings account). Either way, every little helps, so just pick the one that suits you best and gives you the highest rate you find (assuming you don't need the money a year from now).
At the moment, the average house price in Ireland is €224,000 (with Dublin and the surrounding areas being more expensive, of course). Using the average, and following current bank lending rules (where you can be lent 90% of the value of the property) means that you'd need a deposit of 10% (€22,400).
However, we can't forget things like Stamp Duty (1% of the property value if the home is worth up to €1 million- 2% if it's worth more than that), any legal fees (for a solicitor), a property survey to determine any immediate issues, and finally house insurance.
If you are looking to purchase property in Dublin, then you'll need to squirrel away closer to €39,000 for a deposit before you're likely to be given a mortgage as the average house price there is currently around a whopping €385,000.