Investment Products and Savings Vehicles
Mapping the landscape
Every product sits on a spectrum from capital-certain savings to market-linked investment. On the savings side: demand deposits, notice accounts, term deposits and State Savings products. On the investment side: life-wrapped products (unit-linked regular savings plans, single-premium investment bonds, with-profits policies), collective schemes (UCITS unit trusts, ETFs), direct securities (equities, government and corporate bonds), property funds and REITs, and pension wrappers (occupational schemes, PRSAs, personal pensions, AVCs).
What questions probe
- Liquidity and access - notice periods, lock-in to retirement age, early-encashment penalties.
- Capital certainty - "guaranteed" normally means the provider's guarantee, often conditional on holding to maturity, not a State guarantee.
- Charges - allocation rate, fund management charge, early encashment charge, bid-offer spread, entry and exit costs.
- Tax wrapper - deposits (DIRT), life-wrapped funds (exit tax), direct shares and non-life funds (CGT and deemed disposal), pensions (relief on the way in, taxed on drawdown). The wrapper, not the underlying asset, usually decides the tax treatment.
- Protection - deposit guarantee schemes cover cash up to a limit per depositor per institution; investments are not covered.
The classic trap is assuming anything called a "savings plan" is a deposit. Many are unit-linked and can fall in value. A second trap is ignoring the effect of charges on long-term outcomes.
Rule of thumb
For regular saving use FV = P x [((1+r)^n - 1) / r]. Saving EUR 200 a month at 4% gross (r = 0.04/12, n = 120) grows to roughly EUR 29,500 against EUR 24,000 contributed. The average balance is about half the final value, so investment return matters less than for a lump sum - which is why charges and consistency dominate small regular plans.