Chances of winning cash on Prize Bonds slashed as rate cut
THE chances of Prize Bond holders winning some cash in the new year have been slashed yet again.
The National Treasury Management Agency (NTMA) has reduced the interest rate that applies to the state savings schemes -- and this includes Prize Bonds.
From January, the number of weekly €100 prizes will be halved from 500 to 250, according to the Prize Bonds Company, which runs the scheme.
This is the third cut to prizes in a year. Just last June, the top €1m prize was changed from once a month to once every second month. And last January, prizes were changed to provide for 500 weekly prizes of €100 and 8,200 prizes of €50. Previously, there had been 10 prizes of €250 and 9,000 prizes of €75.
The cut in prizes follows the NTMA's decision to cut interest rates applying to the state savings schemes in line with the drop in interest rates in markets worldwide.
The NTMA manages the state savings schemes, which include savings bonds, national solidarity bonds, saving certificates and prize bonds.
They are akin to anybody opening a savings account in a bank except that the money goes to the Government to run the country or pay down the national debt.
With regard to Prize Bonds, the set interest rate is applied to the total amount taken from prize bond sales and that amount is distributed in prizes.
The lower the interest rate, the lower the amount available for prizes.
Last January the NTMA cut the interest rate applicable to Prize Bonds from 3pc to 2.25pc.
This was cut again last June to 1.75pc and has now been further cut to 1.6pc this month.
This month's cut will also apply to the other state saving schemes.
While it will be of little comfort to Prize Bond holders, Finance Minister Michael Noonan told the Dail that the reduction in interest rates "should also be of benefit to Exchequer finances through lowering the cost of servicing the national debt".
"The Government's objective is to raise money to fund the Exchequer at the lowest cost to the taxpayer while remaining competitive in the prevailing market conditions," said Mr Noonan.
Last year, the Government took in over €2bn from the state savings schemes and €1.7bn in the year to end November 2013, said Mr Noonan.
"Our duty in the NTMA is not to overpay," said the association's Brian O'Neill.
Mr O'Neill added that as of last October there was a total of €1.9bn in the prize bond fund.
While €46m in prizes were distributed last year, there was more than €2m in unclaimed prizes to people who may have forgotten prize bonds, some of which could be buried in the bottom of a drawer.