Savers face fresh cuts in interest rates paid on deposits
SAVERS face more pressure as banks are set to keep cutting the interest rates they pay those who leave money on deposit with them.
The prediction of more rates cuts came after new figures showed that banks have now reduced the interest they are paying for money deposited for the last 18 months in a row.
The latest figures come after the state savings schemes sold by An Post had their rates cut, following bank lobbying.
People putting money into a savings account in a bank are getting interest rates that now average less than 1pc, the figures from the Central Bank show.
The interest paid on term deposits -- money locked away for a period of time -- is now just 0.77pc. And there has been a drop in the interest on money in existing bank accounts. The average rate is now 2.3pc, down from 3.5pc since April 2012, the Central Bank said.
Banks will keep cutting rates, according to Simon Moynihan of price-comparison site Bonkers.ie.
"Until customers vote with their feet and actually move their money to the highest yielding accounts they can find, rates will continue to fall," he said.
And the tax (Deposit Interest Retention Tax) on savings is set to shoot up from 33pc at the moment to 41pc from the start of the new year.
Mr Moynihan said savers were in danger of losing money.
"With the Central Bank confirming the 18th deposit interest rate drop in a row, DIRT at a massive 41pc and inflation creeping up, savers that aren't careful could actually lose money by putting it away in some savings accounts."
He said Permanent TSB offered one of the best term deposit accounts in the market at 2.45pc. But five years ago, customers could get 5.3pc on the same account. And back then, DIRT was just 20pc.
"So in the last five years, the rate of interest customers can earn has more than halved and the DIRT they have to pay has more than doubled, leaving almost nothing left over for the punter," Mr Moynihan said.
Households have €120bn in savings in banks, credit unions and state savings schemes, figures compiled by the Irish Independent reveal.
This is made up of €91.7bn in household savings in banks, according to the Central Bank.
There is another €17.9bn in state savings schemes sold through post offices. And the savings in credit unions amount to €10.5bn, according to the Irish League of Credit Unions. The average dividend paid is 0.96pc, the league says.