A NATIONAL Solidarity Bond aimed at individual investors was unveiled yesterday by Minister for Finance Brian Lenihan. The bond goes on sale in all post offices on May 4th, and promises a gross return of 50 per cent to individuals willing to lock away their investment for a 10-year period.
The bond will enable investors to “play their part” in supporting the economy as it will be used to fund the State’s capital investment programme and develop infrastructure, Mr Lenihan said. It is hoped this will help to stimulate economic recovery and create employment
Individuals can access the bond for as little as €500, which can be built up through regular contributors of €25 or more. A maximum of €250,000 can be invested by any one individual, rising to €500,000 for two joint savers.
All funds invested in the bond will be secured by the Government, and can be accessed at any time without penalty. However, the product is designed to incentivise investors to leave their money in the bond for the longer term.
At the end of a five-year period, investors will earn a gross return of 15 per cent. This rises to 29 per cent after seven years.
The gross rate of return reaches 50 per cent at the end of the 10-year investment. Investors will receive this in the form of 10 annual payments of 1 per cent (subject to Dirt) and a 40 per cent tax-free bonus at the end of the 10 years. (If an investor cashes in their bond before the end of the fifth year they will not qualify for any bonus.) The after-tax rate of return for 10 years is 47.5 per cent, or 3.96 per cent annual equivalent rate. An individual who invests the minimum sum of €500 will almost double their money, earning a net return of €475.
No fees, charges or commissions will be applied to the bond, which will be managed by the National Treasury Management Agency. Although it will provide a source of funding for capital expenditure, it is not ringfenced for any specific project.