Savers urged to switch to post office as banks offer just 50c on €1,000
Published 07/06/2014 | 02:30
Savers have been advised to move their money out of banks as more cuts to deposit rates are predicted.
Some banks are offering as little as 50c in interest on €1,000 deposited over a year.
The ECB reduced its key lending rate to just 0.15pc this week, and told banks it would charge them for leaving spare cash on deposit with the Frankfurt-based central bank. This is expected to force more reductions in savings rates.
Banks have been cutting the interest rates paid to depositors since April 2012 but in the past four weeks there has been an acceleration in the rate of reductions.
Frank Conway, of the financial literacy website MoneyWhizz.org, warned savers that deposit rates will come under further pressure and he advised them to move their savings out of banks.
"Savers should move as all providers have been slashing rates since the summer of 2013, a trend that is expected to continue, if not accelerate in the coming months," he said.
"There are no winners in the savings market today. With the ECB sending the strongest signal yet that savers are persona non grata, finding the best deal for either a lump sum or regular saver's account is getting more difficult if earning income is a goal."
Simon Moynihan, director of the price-comparison site Bonkers.ie, said the best one-year savings accounts in banks were now yielding just over 2pc.
Interest earned on bank deposits is also taxed at 41pc, unless the account holder is exempt from the tax.
Mr Moynihan advised those who are prepared to put their money away for at least three years to consider the savings bonds and savings certs sold through An Post as there is no deposit interest retention tax (DIRT) on these.
"If you are prepared to lock your money away for four years or more, you are better off putting it in the post office," he said.
Mr Conway said the three-year Savings Bond pays a cumulative tax-free bonus of 4pc at the end of the third year. Worked out annually, the return is 1.32pc tax-free.
Mr Conway added: "For simple convenience and a good return, it's difficult to beat An Post."
The best regular saver, or monthly interest rate, is provided by Nationwide UK (Ireland), which pays a 4pc return.