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Fall in numbers saving as banks cut rates again

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Brendan Synnott, managing director of Nationwide Building Society said stronger economic growth would mean people would have more money to spend and save in the coming months

Brendan Synnott, managing director of Nationwide Building Society said stronger economic growth would mean people would have more money to spend and save in the coming months

Brendan Synnott, managing director of Nationwide Building Society said stronger economic growth would mean people would have more money to spend and save in the coming months

THERE has been a fall in the numbers of people saving every month.

This is despite most consumers being optimistic about their ability to put money aside in the coming months.

Just a third of people said they were saving regularly, down from 41pc in July, according to the savings index put together by Nationwide UK (Ireland) and the Economic and Social Research Institute.

Experts said there was likely to be a number of reasons for the decrease in monthly savers, citing continuing cuts in savings interest rates, people spending more, higher savings taxes imposed this year and the ongoing pressure on household budgets.

Typical interest rates paid on savings accounts in banks are now less than half of what was being paid two years ago.

Permanent TSB and AIB have again cut their savings rates. Some accounts are now only paying 0.01pc in interest.

That means a payout of just of 10c on €1,000 saved over a year - before tax.

Tax on savings interest is levied at 41pc.

One of the biggest reductions in savings interest being imposed by Permanent TSB is on what it calls the Former Northern Rock Savings Incentive Account. The rate is going from 0.75pc to 0.01pc from November.

Permanent TSB had the highest demand deposit account rate at 2pc, but this is coming down to 1.75pc from November 11. This will bring it into line with the demand deposit rates offered by KBC Bank and RaboDirect.

AIB this week reduced the rate on its Online Notice 7 account by 0.25pc to 1.05pc. That used to be one of the highest-interest paying accounts at the bank.

Sentiment

The move by the European Central Bank to reduce its key lending rate to just 0.05pc last week led experts to predict that the banks would keep reducing saving rates.

The Nationwide/ESRI savings index, which measures overall sentiment towards saving, decreased to 97 in August, down five points since July. Despite the decline in sentiment last month, 80pc of people surveyed said they expect to maintain their current level of saving in six months' time. Another 12pc said they plan to save more over the same period.

Nationwide UK (Ireland) managing director Brendan Synnott said stronger economic growth would mean people would have more money to spend and save in the coming months.

Irish Independent