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More people saving as households slash debts

IRISH people are starting to put more in their piggy banks as households finally began to reduce their debts, according to new data.

The number of regular savers increased in December as people's ability to put away money improved during the month.

Although the Christmas month is traditionally a bad time for saving, the index from building society Nationwide UK (Ireland) shows that people were prudent enough to put away something for a rainy day.

"The main difference is the people actually have the ability to save now," said Brendan Synnott, managing director of Nationwide UK (Ireland).

"A year ago the regular saver had all but disappeared. We've seen a huge turnaround since an all-time low in regular savers was recorded last February."

POLICY

The index found that 34pc of people surveyed in December said they put away money regularly, compared to just 30pc a year ago.

The lowest figure ever recorded was in February of last year, at 28pc.

Mr Synott said: "One of the biggest reasons for this is that households have managed to reduce debt levels. A year ago, any spare cash was going toward paying down debt. That's finally begun to change."

A fall in unemployment rates also contributed to the increase.

Nationwide expects the number of regular savers will continue to improve in 2014 – though savings behaviour is still far below peak levels.

This was partly blamed on the Government. Research showed people still viewed current government policy as difficult for savers. Less than a quarter of people surveyed said now was a good time to save, only barely above a record low recorded last month.

This was particularly true for those aged under 50, who have reported increasing unhappiness with Government policy for four straight months.

LENDING

Mr Synnott blamed this on low interest rates and steep taxes on any interest earned.

This European Central Bank's decision to cut its key lending rate in November resulted in falling interest rates on savings across Europe. The Government also increased the rate of tax charged to interest earned on deposits (DIRT tax) to 41pc from 33pc in the latest budget, effective from January 1, 2014.

"All of Europe is facing low interest rates, but in Ireland this is compounded by the high taxes levied on interest earned," Mr Synott said.

"Reducing DIRT tax is the single most important thing the government could do to encourage saving."

hnews@herald.ie


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