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Thursday 31 July 2014

Savers to lose out in new year rate cut

Charlie Weston Personal Finance Editor

Published 13/12/2012|05:00

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SAVERS are set to lose out if the European Central Bank goes ahead with an expected interest rate cut early in the New Year.

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A leading investment strategist said that while it would be good news for mortgage holders with trackers, it won't be welcomed by savers.

The eurozone reduction in rates is one of the reasons banks will keep cutting the interest rates they pay on savings accounts, the head of global strategy for Standard Life, Andrew Milligan, said in Dublin yesterday.

Banks were also continuing to cut savers' rates to comply with regulatory rules, Mr Milligan said.

The more than a dozen banks and building societies that take deposits here have been cutting the rates they pay savers since the summer.

Some of the biggest cuts have been for money that can be withdrawn from a bank with no notice, so-called demand deposit accounts.

DIRT

And savers were hit in the Budget, with DIRT (deposit interest retention tax) set to rise from 30pc to 33pc from the start of next month.

From the beginning of 2014, all savers will also have to pay PRSI ( pay related social insurance) on any interest earned from savings.

"There is almost certain to be another reduction in European Central Bank rates in January or February.

This is because all the signs are that the eurozone is entering into another mini-recession," Mr Milligan said.

The ECB kept interest rates steady last week.

But members of the Governing Council held "a wide discussion" about cutting interest rates from their current record low of 0.75pc, said Reuters and Bloomberg.

There is some €92bn in savings belonging to households currently on deposit in banks and buildings societies, with another €17bn in savings products sold by An Post.

Irish Independent

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