Vol. 432 No. 3
11 Mr. Connaughton asked the Minister for Finance his views on a return on investment of £483 redeemed in 1993 based on the purchase of £25 worth of saving certificates in 1926; and if he will make a statement on the matter.
An investment in savings certificates of £24.18 shillings in the second half of 1926 would now have a value of £486.72. This calculation is based on an investment period of 66.5 years and represents an average rate of return of about 4.5 per cent compound interest per annum tax free.
In recent years, rates of return on savings certificates have been much higher than this. However, amounts invested in 1926, in the first issue of savings certificates will have enjoyed these higher rates for the appropriate periods. For the initial periods of investment, however, interest rates were very low — reflecting market conditions at that time.
The rate of return on the current eleventh issue of savings certificates is 7 per cent compound interest per annum if the investment is held to five years. It should be noted that this return is tax free.
Will a person with a false name on these certificates going back to 1926 qualify for the amnesty?
Does the Minister think the rate of interest has anything to do with the momentous year that was in it?
That may be so but when I saw this question had been tabled I wondered what the trend was over the period in question and I think it makes interesting reading. The current value of a certificate purchased in 1926 represents a total return of more than 1,900 per cent. Inflation for the period 1926-93 is calculated at more than 3,100 per cent. It is felt that all other comparable investments held over the same period would not have matched inflation, especially having regard to the difficult economic climate of the twenties, thirties and fifties.
Did the Minister say 1,900 per cent?
Correct. When one compares an investment in saving certificates against other comparable investments it looks as if, through difficult decades, saving certificates represent a very good value. Incidentially, there is still £6,500 worth of saving certificates purchased in 1926 outstanding.
