Written answers

Thursday, 17 January 2013

Department of Finance

Deposit Interest Rates

Photo of Brendan SmithBrendan Smith (Cavan-Monaghan, Fianna Fail)
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To ask the Minister for Finance if he will clarify the matter of recent drop in deposit interest rate by An Post and if he will explain the reason this is justified; if savings of Irish savers are no longer required since the Euro financial crisis and general liquidity has improved somewhat; if we now want to raise borrowings at more expensive rates on the international bond market; if we are trying to divert Irish savers to some other product; if he will explain the drop which is way ahead of recent trends in the market; and if he will make a statement on the matter. [2145/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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In recent months there has been a significant fall in market interest rates across Europe and particularly in Ireland and this has resulted in the interest rates offered by the banks declining significantly. The recent reduction in State Savings rates is in line with this general reduction in interest rates. This is the first change in State Savings rates since 2007. Irish savers have been very supportive of the Government in its task of funding the Exchequer and the State Savings products remain an important source of funding for the State. In 2012 alone, individuals provided the Government with net funding through the range of State Savings products of over €2 billion.

The Government welcomes and wants to encourage continued support from savers and for this reason, despite the downward trend in interest rates, the Government continues to offer attractive returns on a range of fixed-rate State Savings products and pays 7% on the three-year Savings Bonds, 12% on the four-year National Solidarity Bond, 15% on the five-year Savings Certificate, 17% on the six-year Instalment Savings and 45% on the ten-year National Solidarity Bond.

The interest rates offered by State Savings products reflect both the fact that these savings are a direct obligation of the State and the flexibility of the retail offering compared to, for example, Government Bonds.

Holders of State Savings products can encash their products with one week’s notice and will always receive their initial investment back plus the interest amount appropriate to the period for which the money has been on deposit.

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