Rates slashed on An Post products

The NTMA has reduced the interest rates offered on the State savings products it sells via An Post.

The reductions — which were announced yesterday and come into effect immediately — will only affect new purchases made from today. However, they will see significant falls in returns on savings bonds and certificates and the National Solidarity Bond.

For instance, the fixed interest rate total return for customers on the three-year savings bond offered by the NTMA/An Post is dropping from 7% to 4%; the six-year instalment savings rate falls from 17% to 14%; the 10-year national solidarity bond rate goes from 45% to 35%, and the four-year version of that bond will see a new fixed interest rate of 8%; as opposed to 12% before. The rate for the five-year savings certificate is dropping from 15% to 11%.

Although there will be no change to An Post’s ordinary deposit account, which pays a rate of 0.25%, changes to variable rate products will see alterations to the ‘Deposit Account Plus’ product and the €1m prize draw for Prize Bonds switch to a bi-monthly occurrence.

The new interest rates represent a reduction of between 0.49% and 0.96% on the annual equivalent rate (AER) previously available. However, any money already invested in any of An Post’s savings products will continue to receive the rates attached to them when they were purchased.

While An Post acts as the sales agent for such products, the NTMA is solely responsible for setting the interest rates.

An NTMA spokesperson said: “The new rates reflect the reductions in interest rates in the savings market and in sovereign bond yields, generally.”

Last month, the Irish Examiner reported that the Government was coming under increased pressure from banks to force An Post to cut interest rates on its savings products; on the grounds that its rates were more competitive than those offered by other financial institutions.

According to the banks, the higher interest rates that were being offered by An Post/NTMA distorted competition in the marketplace and created an uneven playing field.

A source close to the Department of Finance, which has been extensively lobbied by the leading banks, said at the time that it was an issue that was being looked into, while the NTMA said that it constantly keeps rates under review. The last interest rate cut on An Post savings products occurred at the end of last year.

Currently Bank of Ireland, AIB and Permanent TSB are offering rates of between 2% and 2.85% on regular savings accounts.