NTMA cuts deposit interest rates

The NTMA has lowered the interest rate on a number of its savings products to reflect the lower interest rate environment.

This is the second reduction in the interest rates of An Post products this year. Last May, the Irish Examiner reported that the three domestic banks — Bank of Ireland, AIB, and Permanent TSB — had been putting pressure on the Department of Finance to lower the interest rate on An Post products on the basis that it was distorting competition.

The banks claimed An Post had been soaking up a disproportionate amount of deposits because of the higher interest rate it offered.

This weakened the overall financial sector because the banks needed to increase deposits as part of the deleveraging process ordered by the troika.

In the latest round of interest rate reductions, the 10-year national solidarity bond goes from 35% to 30%. The 5.5-year savings certificate has been reduced from 11% to 10%. The six-year instalment savings is now offering a 10% fixed-rate total return, which is down from 14%.

The changes only apply to all purchases of these products effective from Dec 8.

The existing issues of these products are now closed to new purchases. “They have no effect on the existing holders of savings bonds, savings certificates, instalment savings, or national solidarity bonds as those interest rates have already been fixed for the duration of their term,” the NTMA said.

“Any money already placed in previous issues of these products prior to 8 Dec 2013 will continue to receive, for their remaining term, the fixed rates applicable to each product on the day that it was purchased.”

Retail bank deposits were put under further pressure in the last budget when the Government increased the Dirt tax and announced an annual levy of €150m based on the size of deposits.

The NTMA also announced that the rate used to calculate the monthly Prize Bond prize fund in Jan 2014 — and until further notice — will be 1.60%.

The top prize structure is unchanged and there will continue to be a €1m prize in the last weekly draw of each second month — February, April, June, August, October, and December — it added.

The number of weekly €100 prizes is being reduced from 500 to 250 prizes commencing Jan 2014. Based on the current number of Prize Bonds, the new 1.60% rate will generate almost 8,500 weekly €50 prizes.


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