Saturday 22 October 2016

Stingy banks we rescued are giving nothing back

Published 10/01/2016 | 02:30

'Banks that are desperate to return to profits and prepared to bite the hand that feeds them'
'Banks that are desperate to return to profits and prepared to bite the hand that feeds them'

Banks that were rescued by the taxpayers of this country have emerged as the stingiest when it comes to paying interest rates on savings.

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After costing the State billions of euro to keep them afloat, hopes that our domestic banks would reward that generosity with decent returns for savers have been shattered.

It is just another example of low standards in banks that are desperate to return to profits and prepared to bite the hand that feeds them.

A survey by the Consumers Association found that Bank of Ireland had one of the worst rates.

The survey looked at lodging €10,000 for a year in an instant-access account.

What is compared is the return before DIRT (deposit interest retention tax) at 41pc has to be paid.

Bank of Ireland will give you a measly €1 for your deposit. This is because its interest rate on its demand deposit account is a tinchy 0.01pc.

The same rate of return is given by Permanent TSB. Only marginally better is EBS, the former building society that used to put a high store on saving and is now part of AIB.

AIB is hardly generous with a rate of 0.05pc. This means your €10,000 will generate just €5 after a year. Yes, a fiver. And that is before tax.

The best rates are on offer from Belgium-owned KBC Bank and Nationwide UK (Ireland), both offering 1.15pc over a year.

The best available one-year term rate from Bank of Ireland is 0.65pc and the best from AIB is 0.55pc This means the foreign-owned banks are offering double the return of taxpayer-funded Irish banks on these types of accounts.

All of this is in the context of the fact that we Irish are tremendous savers. There is €20,400 on deposit in Irish banks for every man, woman and child in the country, according to calculations by Simon Moynihan of price comparison site

The banks will argue that we are in a low-interest environment. And it is a given that the rescue of the banks also meant that savers were effectively rescued also.

On the other hand, along with the State-rescued banks being extremely stingy, savers have to contend with the Exchequer taking almost half of any interest they earn in taxes.

The DIRT tax has doubled during the austerity years. And anyone with unearned income of greater than €3,174 has to pay an extra 4pc PRSI (pay related social insurance) on deposit interest, bringing the total tax on interest earned to 45pc.

This is a punitive tax on people who have prudently saved. The combination of tax and inflation means real returns for savers are now effectively nil.

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