Be wary of “total return” – concentrate on the AER
Often, the “total return” is highlighted for Irish State Savings products. This is a calculation which takes into account how much you would make over the course of, say, a ten year deposit, factored into the initial investment amount. However, it is stipulated in the Irish Consumer Protection Code of 2012 that the percentage AER must always be shown, as this is a much more meaningful figure.
For example, if you were to put €1000 into a savings bond for ten years, you would get back €1160. This €1160 is a 16% increase from the original amount, but it is misleading as you might think based on the advertised 16% return that you would get 16% interest per year. However, this is in fact an AER (annual equivalent rate) of 1.5%, which you then earn 10 times (once per year).
The key figure to look at when selecting a savings bond is therefore the AER (annual equivalent rate). Currently, the top AER offered by Ireland State Savings is 1.5% for a 10-year National Solidarity Bond. While the products are not subject to DIRT, the interest rates are lower than similar fixed-term accounts in mainland Europe with shorter durations.