Category Banking

With interest rates falling seniors should invest in Fixed Deposits

25 February 2009 First National Bank (FNB)

At a time when the official interest rates are coming down in South Africa, First National Bank (FNB) has sounded a clarion call, urging the senior investors to now consider investing some of their money in long term Fixed Deposits.

The SA Reserve Bank has cut interest rates in December 08, and February 09, with further interest rate cuts anticipated over the next few months, following the path taken by some of the world’s leading central banks, who are lowering interest rates as inflation dwindles and economic growth spirals down.

The Bank of England’s lending rate is at a historical low of 1.5%, European Central Bank 2%, US Federal Reserve 0.25%, Sweden 1.75% and Australia 2.75%.

In anticipation of lower than expected Growth figures to be released this week, some economists are predicting that the Monetary Policy Committee (MPC) may convene an urgent meeting to further reduce interest rates by as soon as the end of this week.

“A large number of seniors live of the fixed income from bank investments products. Three years ago, interest rates were at a low of 6, 5%, and seniors felt the difficulty of making ends meet from one month to the next. With interest rates now going down again, people who want to protect their income should diversify their investments by moving some of their monies into longer term fixed deposits and by so doing take full advantage of the current higher returns.” says Robert Keip, FNB Head of Investments.

During the 2009/10 budget presentation, as was put forward by Finance Minister Trevor Manual in parliament earlier this month, further tax relief on interest earnings was announced. Keip further emphasise that now is the time to take advantage of these concessions by placing more monies into secure banking investment products.

The table below reflects the Rand amounts that can now be invested, at current interest rates, into interest bearing investments without paying tax.

Single Married
Investor 65 years Plus 1,427,500 2,855,000
Investor 55 to 64 years old 940,000 1,880,000

(Amounts reflected are based on the 2009/10 Tax Thresholds and tax exempt on interest earned, assuming that interest earned is the only source of income)

To strengthen our “How can we help you” slogan FNB offers all senior investors, 55 years and older, an additional 0,50% on 12 months and longer fixed deposits.

“We would encourage senior customers to move swiftly and invest for a longer fixed term, protect their earnings, and be able to maintain their life-style in these volatile times,” concludes Keip.

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