Postal Savings Bonds vs. Deposit Accounts: Which Is More Profitable After the ECB Rate Cut?

Postal Savings Bonds or Deposit Accounts? What’s More Convenient After the ECB Rate Cut

As interest rates remain at 3.5% and the ECB is poised to cut rates again in the coming months, savers are questioning whether it makes more sense to invest in Postal Savings Bonds or in deposit accounts to secure higher yields before they begin to decline.

To better compare these savings instruments, let’s analyze the gross and net yields, taking into account the best available interest rates from both Postal Savings Bonds and deposit accounts:

Instrument	Maturity	Gross Yield	Taxation	Net Yield
BFP Premium	12 months	3%	12.5%	2.63%
ING Deposit Account	12 months	4%	26%	2.96%
Twist-Time Deposit	24 months	3.80%	26%	2.81%
Aidexa Deposit Account	36 months	4.30%	26%	3.18%

However, the choice shouldn’t be based solely on net yield.
Other factors like flexibility, liquidity, and the investment horizon also significantly influence the decision.

What Are Postal Savings Bonds and Deposit Accounts?

Postal Savings Bonds are debt instruments issued by the Cassa Depositi e Prestiti, guaranteed by the Italian State and distributed by Poste Italiane.
They have various maturities and offer a fixed interest rate, with the option to withdraw interest annually or upon maturity.
At maturity, bonds can be renewed, redeemed, or exchanged for other state securities.
The new BFP Premium provides a gross return of 3% after one year.
To purchase these bonds, one must hold a postal savings book.

The key advantage of Postal Savings Bonds lies in their state guarantee, resulting in an exceptionally low risk of capital loss.
Apart from the BFP Premium, various other bonds come with different durations and interest rates.

Deposit accounts, on the other hand, are banking products that allow funds to be deposited while earning a fixed interest rate, typically higher than regular checking accounts.
These accounts can either be short-term, with maturities of a few months to a year, or long-term, typically over one year.

Moreover, deposit accounts can be classified into two categories: free and tied.
For free accounts, withdrawals can be made anytime, along with any accrued interest, while tied accounts incur penalties for early withdrawals.
The Arancio account from ING represents a free account without withdrawal restrictions.

One primary benefit of deposit accounts is their coverage by the Interbank Deposit Protection Fund (FITD), similar to the safety net provided for Postal Savings Bonds.

Similarities and Differences

While Postal Savings Bonds and deposit accounts are very similar, they have some vital differences.

Similarities

Both products offer a fixed interest rate and are considered safe investments due to their government guarantees.
Funds can be withdrawn in both cases, but only for non-tied deposit accounts.
A stamp duty of 0.2% applies to both.

Differences

Postal Savings Bonds have a set maturity, while deposit accounts can be short or long-term.
The interest accumulation mechanism also varies.
Bonds require a minimum waiting period of 6 to 12 months, while deposit accounts accumulate interest daily, which is paid out at specified intervals.
Additionally, Bonds can be assigned to minors, ensuring a future yield upon reaching adulthood.
Taxation on returns is different; Bonds are taxed at 12.5%, while deposit accounts incur 26%.

Ultimately, understanding these differences is key to choosing the right investment based on individual financial needs.

Why Invest in Postal Savings Bonds or Deposit Accounts?

Investing in Postal Savings Bonds or deposit accounts is a wise choice for various reasons.
Firstly, these instruments carry a low risk of capital loss, making them ideal for those wishing to protect their savings without engaging in market volatility.
Additionally, they provide a guaranteed return on the invested capital, assuring the recovery of the initial investment.
They are also user-friendly and do not require extensive financial expertise compared to more complex investments.

The Risks of Postal Savings Bonds and Deposit Accounts

Even though Postal Savings Bonds and deposit accounts are among the safest instruments on the market, potential risks exist.
For Postal Savings Bonds, the primary risk is related to maturity.
If not redeemed within 10 years post-maturity, the investment becomes void.
Therefore, keeping track of maturity dates is essential.

For deposit accounts, the main risk pertains to the solvency of the issuing bank.
If a bank fails, depositors may lose their funds.
However, Europe’s deposit guarantee scheme protects deposits up to €100,000 for each depositor per bank.
It’s essential to ensure that the issuing bank complies with this guarantee scheme and to periodically check the bank’s financial health.

In summary, Postal Savings Bonds and deposit accounts represent safe and efficient saving tools.
However, awareness of potential risks and thorough examination of contract conditions before investment are crucial.