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Calls for ECB rate hikes to be passed on to savers using An Post schemes


There is around €24.8bn invested in State Savings products by households. Stock image.

There is around €24.8bn invested in State Savings products by households. Stock image.

There is around €24.8bn invested in State Savings products by households. Stock image.

Calls have been made for higher interest rates to be paid on State Savings products, following the five rate rises by the European Central Bank (ECB).

Consumer advocates pointed out that the rates on the tax-free State Savings products were cut consistently over the past few years – and the interest on them has yet to rise despite the five increases in ECB rates.

In the past, banks have admitted lobbying the State to have the interest paid on state savings – which are sold through post offices – reduced as they claimed they were at a competitive disadvantage in the battle for savers’ cash.

Now there is around €150bn in savings in banks and credit unions, with banks able to deposit much of these funds in the ECB. Last Thursday the ECB increased its deposit rate to 2.5pc.

The National Treasury Management Agency (NTMA) has not increased the interest rates on its savings products since the ECB deposit rate moved from minus 0.5pc in the summer to 2.5pc now.

Chairman of the Consumers Association of Ireland Michael Kilcoyne said the failure of the NTMA to increase the interest rates on the State Savings products was “an abuse” of people who were seeking security of putting money into the funds.

“Savers are giving the State money and getting virtually nothing in return for it.

“The NTMA should increase its rates,” Mr Kilcoyne said.

“This is an abuse of people who are seeking the security of State Savings products by not paying them a realistic return.” AIB, Permanent TSB and Bank of Ireland have all increased their deposit rates in the last few months, even if the rises are less than savers are seeking.

But the NTMA has yet to raise what it pays on its Savings Certs, Savings Bonds and the National Solidarity Bonds.

The NTMA’s 10-Year Solidarity Bond pays 0.96pc. Savings bonds – a three-year product – pay 0.33pc, while the Four-Year Solidarity Bond pays 0.5pc.

Always hugely popular as there is no deposit interest retention (Dirt) tax due on them, there is around €24.8bn invested in State Savings products by households.

The Dirt rate on bank and credit union savings is 33pc.

Daragh Cassidy of price comparison site Bonkers.ie said savers were effectively subsidising mortgage holders at the moment. He said that recently Irish mortgage rates have become more competitive compared to our European neighbours as the main banks have held off on passing on all of the ECB’s rate increases.

In both November and December Ireland had the third lowest mortgage rates in the Eurozone.

“While this is welcome, it has largely come at the expense of savers,” he said.

He said the ECB is almost guaranteed to hike its deposit rate to 3pc – and its main lending rate to 3.5pc – next month.

“These hikes will all largely be passed on to mortgage customers eventually, so it’s only fair that savers should benefit too.”

An NTMA spokesman said: “We keep rates applicable to State Savings products under review.”

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