(Once again) if you are a pensioner living off interest income your “salary” has effectively been halved over the past few years by all the interest cuts and while inflation might officially be at some unbelievably low level the cost of living seems to have risen (oblivious to these low inflation figures).

So if you are looking for interest income, what are your options?

The “only” option (in my opinion) is the RSA Retail Bonds – the 2 year rate is still 8.5% while the 3 and 5 year rates are 8.75 and 9% respectively. There might be other products out there offering similar or even slightly higher rates but the reason that they are offering higher rates is because there is higher risk associated with them. The RSA Retail Bond is guaranteed by the SA Government (which is about the safest guarantee you can get in SA).

An “investment” of R100000 for 2 years would give you the following monthly interest:

• RSA Retail Bond – R708.33 (R8500/12)
• Capitec – R650 (R7800/12)
• Nedbank – R454 (R5450/12)
• FNB – R467 (R5600/12)
• ABSA – R463 (R5560/12)
• Std Bank – R450 (R5400/12)
• “Average” Money market unit trust – R500 (R6000/12)

Rates on the RSA Retail Bond are adjusted at the end of the month (unlike money market rates which move daily) and so if you are looking for interest income and are prepared to lock your capital away for the next 2 years then you still have until the end of September to invest at 8.5% (it is quite possible that the rate will be adjusted downwards by 0.5% at the end of Sep).

Based on the above information (and that available on the various bank websites) I would stay far away from all of the “big 4″ bank fixed deposits – even unit trust money market rates are better than their rates.

Related posts:

1. RSA Retail Bonds part 2
2. RSA Retail Bonds
3. Interest (ing)…

For anyone who is prepared to be locked in for a while there is an even better option that has been overlooked while short term interest rates have been high and that is the RSA Retail Savings Bond. It is a 2, 3 or 5 year option that is being offered by the SA Government (National Treasury) directly to the public and the interest rates are far better than anything else out there (and there are no fees to get in).  The only “catch” as I can see it is that you are locked in for the period (you can exit after 12 months but there will be an exit penalty). The rates are in the table below but for more information on this go to www.rsaretailbonds.gov.za

CURRENT INTEREST RATES

They also have an inflation linked option which is also quite attractive.

That’s all for now

Gregg

Related posts:

1. Interest (ing)…
2. You can still get 8%
3. RSA Retail Bonds