Negative interest rates: Why are companies wrongly storing their money in the bank?

Many companies are finding that negative interest rates are causing them to store their money in the bank rather than invest it. However, this is a blunder since they are losing out on some much-needed money.

The latest surge in global debt can’t be serviced except through devastating interest rates for years. The central banks understand this, and the only way out is to allow inflation to run wild. Governments have been borrowing at breakneck speed in order to reignite economic growth faster than the debt grows. The Federal Reserve, in tandem with the ECB, has pledged to ride shotgun for this strategy, allowing time and inflation to whittle away at the real value of outstanding debt while they take part by aggressively lowering rates.

What does inflation mean for our savings?

Savings are collateral damage in the new rules of the game. Banks in Ireland are charging up to -0.65 percent to keep money on deposit. So far, it has had a significant impact on Credit Union cash capacity, but it will reach you next year after seeping down from seven-figure consumer deposits. You may disregard bank claims to the contrary.

There is no replacement for rock-solid guarantees, capital and interest rates that are higher than inflation. It does not exist in nature, and claims to the contrary are deceptive. To break even in this decade against inflation, half of your savings will need to grow by 4% to 5% each year to make up for the losses in the other half. This eliminates low-risk investments.

The way you can avoid this pitfall is by making sure your company has an investment plan in place before rates go negative. You’ll want to make sure there’s someone on board who understands how investments work and knows when the best time to pull out of stocks or bonds will be. Once you have all these things set up, then you won’t worry about taking advantage of negative interest rates if they happen again!

What is a Corporate Saver Strategy?

Through a Corporate Saver Strategy, you can purchase units on a monthly basis and smooth out any potential ups and downs over the longer term. This will allow you to increase the risk level in fund choices.

Two years ago, one client approached us with a key objective to create a return to offset any costs/losses due to a negative interest charge of -0.65%. Initial monthly premiums would be used to buy units in higher risk funds to maximise growth, once agreed levels of funds have accumulated in the fund, we reduce the risk level to ring-fence the growth Just look at what they have achieved since.

In straight terms, this client’s total payments to date (€1,067,396) has grown to a tidy sum of €1,159,329 (an increase of over €90,000!) thanks to this straightforward technique.

How does it work?

Rather than invest a lump sum all in one go you “drip” feed it in over time. Easy access means you can withdraw funds at any time, without penalty.

In the example above, the company was able to retain a large portion of their funds on deposit, maintain cash flow in the company for their own use, and increase, decrease or stop as they pleased without penalty. This type of investment over the last couple of years would have seen average returns of at least 4-6% per annum. …Much better than deposit but also with less volatility than investing with one lump sum.

Who might our corporate saver strategy be suitable for?

This scheme is ideal for company/corporate deposits or self-administered pension schemes with significant cash on deposit (at negative rates of interest), who wish to replace a portion of these deposits with an element of investment risk to reduce negative interest and improve the overall return.

The Bottom Line

The window of opportunity for larger monthly premiums to pay into these investments is closing. Life companies are not deposit facilities and thus are starting to restrict the level of funds they will take on easy access (without penalty), because it is not a profitable model for them.

Unsure about the suitability of the Corporate Saver Strategy for you? Don’t wait around while the opportunity is still virtually unknown.

If you’re interested in finding out how a corporate saving strategy might apply to you, please feel free to message us on social media or email

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