NTMA exploiting Irish Savers as UK Equivalent NS&I Offer Record High Rates

J

Jack Russell

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Yesterday, the UK government’s savings bank, NS&I launched a one-year fixed-rate savings account paying a record 6.2% rate. The move is seen as "throwing down the gauntlet" to banks who have been slow to pass on rate increases.
https://www.theguardian.com/money/2023/aug/30/uk-savings-rates-nsi-deal-bank-growth-bonds

Meanwhile in Ireland, the most savers can expect to receive is 1.5% annually if they lock their savings away for 10 years.
There is no one year savings bond, the shortest period is 3 years, which returns 0.33% AER.

NS&I also recently announced that their "Premium Bonds" rate would be 4.65% from September.

Premium bonds prize fund rises to highest level in 24 years

Millions of holders will also have increased chance of winning from September in NS&I draw
www.theguardian.com

Irish savers who have the equivalent Prize Bonds can expect to receive a derisory 0.35% return.

Irish government politicians giving out about the banks being "laggards" for saving rates are total hypocrites in light of the NTMA's paltry rates which they can dictate. Worse still are journalists who regurgitate their nonsense without pointing this out.

NTMA rates: https://www.statesavings.ie/help-support/help-articles/revised-rates
 
The Irish government can borrow money at a much lower rate than 6.2%, or 4.65% for that matter.

Why should they reward already well off people with an increased borrowing rate, when they can, and should use the money to make targeted tax cuts, and welfare increases to those who need them most?
 
callybags said:
Why should they reward already well off people with an increased borrowing rate, when they can, and should use the money to make targeted tax cuts, and welfare increases to those who need them most?
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Well, for one, because it says it will. But it isn't.

"The NTMA constantly reviews rates to ensure that products remain competitive in the savings market generally, whilst providing good value to the Exchequer in terms of borrowing costs."
 
askabouttax said:
Well, for one, because it says it will. But it isn't.

"The NTMA constantly reviews rates to ensure that products remain competitive in the savings market generally, whilst providing good value to the Exchequer in terms of borrowing costs."
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Tut tut, selective bolding!!! You need to consider that statement in its entirety; including the unbolded bit, which reads:

whilst providing good value to the Exchequer in terms of borrowing costs.
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which it is doing!
 
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As a taxpayer, I don't see why they should increase interest rate if they don't have too. As a saver, I am looking into the possibility of moving my funds currently invested to other institutions. I actually have zero problem with that. Why would anyone think the state should borrow at an additional cost?
 
callybags said:
Why should they reward already well off people with an increased borrowing rate, when they can, and should use the money to make targeted tax cuts, and welfare increases to those who need them most?
Click to expand...

askabouttax said:
Well, for one, because it says it will. But it isn't.

"The NTMA constantly reviews rates to ensure that products remain competitive in the savings market generally, whilst providing good value to the Exchequer in terms of borrowing costs."
Click to expand...

Marsupial said:
Tut tut, selective bolding!!! You need to consider that statement in its entirety; including the unbolded bit, which reads:

whilst providing good value to the Exchequer in terms of borrowing costs.

which it is doing!
Click to expand...

Because, as above, callybags asked the question "Why should they reward well off people with an increased borrowing rate"...as opposed to doing other things.

I certainly didn't selective bold - I bolded the piece that answered Callybags question (while including the other end of the sentence), because they are not currently ensuring that products remain competitive. As you say Marsupial, they are only doing the latter, in terms of the good value to the Exchequer.
 
1. Rates in sovereign bond yields, previously cited as a justification for cuts, have gone up but state savings rates have not.
2. Rates are historically low for most of their offerings: https://www.oireachtas.ie/en/debates/question/2023-07-04/232/
3. The political hypocrisy mentioned in the OP. Government are criticising banks for offering low interest rates but can act to force higher interest rates via state savings. They caved to lobbying from the banks to have the NTMA cut state savings rates 10 years ago: https://www.thetimes.co.uk/article/banks-had-role-in-an-post-cuts-b0k7lzvfgxj
thedaddyman said:
Why should we care what a foreign country outside of the EU and the Eurozone offer. ? It's totally irrelevant in my mind
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The NS&I products are available to Irish citizens living across the border in the North, so it's not as if the comparison is to some faraway country with no connection to Ireland.
Our current Finance Minister Michael McGrath seemed to be indicating in 2016 that elderly people were being taken advantage of when cuts were announced that year:
“Reductions in the number of opportunities to win such prizes will, I have no doubt, reduce the attractiveness of Prize Bonds to small investors. Many people who have Prize Bonds are elderly people or people who have inherited them from a loved one. Removing the attractiveness of the product is short sighted decision by the NTMA, and one which should be reviewed."

Prize Bonds Payouts Slashed By 40% - Business Plus

According to the NTMA annual report, in 2016 savers cashed out of the state’s 3-year Savings Bonds after the NTMA slashed the Annual Equivalent Rate to 0.33%
businessplus.ie
He also said:
“The prize bond issue highlights once again the very poor environment for savers in Ireland, made worse by massive increases in DIRT tax rates. This is an issue which will need to be addressed in future budgets”.
https://web.archive.org/web/20221205073001/https://www.fiannafail.ie/news/savers-short-changed-as-prize-bond-pay-out-slashed-ff
 
Well said Jack Russell. Furthermore our government complains about banks offering paltry interest rates on savings but then they screw savers for 56% (?) DIRT....
 
You’re aware that the UK is a different country with a different currency, and that it’s outside the EU, yes?
 
@Jack Russell Can I make a suggestion. As you feel strongly about this, why not e-mail your thoughts to minister@finance.gov.ie
There is no guarantee that he will take any notice, and he has already said that he spoke to NTMA and that are looking at rates and that he expects some movement soon. But the more people that he hears from directly, the more likely he is to react. Otherwise he is just listening to well known consumer representatives trotting out the unhelpful line that the dire deposit rates are the fault of lazy depositors who wont get off their backsides and look for better rates elsewhere.

Nothing to stop you copying your local TDs and a few of the Personal Finance Corespondents of the main daily rags.

Anybody else who feels strongly about this should do the same.
 
The UK has a different currency and interest rate regime and is not relevant.

Meanwhile Belgium which is in the euro area is this week offering competitive retail bonds in order to push the banks to raise rates:

 
The ECB has a bigger "bazooka" than the Bank of England to force rates down.
Since Mario Draghi's "whatever it takes" a decade ago - it's been explicit ECB policy to remove the necessity for banks to gather retail deposits.
Financial institutions across the Eurozone are already loaded up with sovereign debt purchased at negative yields - the last thing they need is higher interest outgo.
Ultimately wealth must be transferred from the prudent to the imprudent or the whole pyramid comes crashing down. I would suggest - get used to it!
 
Jack Russell said:
The NS&I products are available to Irish citizens living across the border in the North, so it's not as if the comparison is to some faraway country with no connection to Ireland.
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The deposit rate in Nigeria is 5.18% right now and I am sure it is available to Irish citizens living in Nigeria. But it is as relevant to Ireland as is the interest rate offered to Irish, British or any other citizens living in Northern Ireland or Nuneaton or Norwich
 
Not sure why people are arguing the State shouldn't pay more than it has to. Nobody is saying that. Its not an argument. The banks shouldn't have to pay more than they have to. They don't need the funds either but they are being forced to pay more with threats of increased levies etc.
There is no point in the State going on about a dysfunctional savings market and greedy banks when they play a major part in the savings market in this Country. As a matter of fact, they probably have a greater responsibility to be fair considering the typical demographic of their customers.
The NTMA could have acted in the same way as they did in Belgium and forced banks to act through competition. Instead it turned into a political song and dance with every politician and minister condemning banks but being to too stupid to realise they were active in the same market and doing exactly the same thing.
 
askabouttax said:
Well, for one, because it says it will. But it isn't.

"The NTMA constantly reviews rates to ensure that products remain competitive in the savings market generally, whilst providing good value to the Exchequer in terms of borrowing costs."
Click to expand...
I made this point recently about the rationale for keeping state savings rate so low. My suspicion is that it also suppresses the interest rate the ntma needs to pay when it rolls over its massive debt load in the bond markets. Other posters said that this was not the case as they are different markets and institutional bond buyers can't invest in state savings.
However this is not the full picture because the institutional investors know that the ntma can get money from state savings at a lower interest rate than in the bond markets therefore ntma benefits because the market interest rate for irish government bonds is lower than it otherwise would be. Of course nobody in the ntma would openly admit that.

Also the fact that ireland has punitively high investment taxes on shares and ETFs means that much more money is channeled into state savings and bank savings deposits than our international peers lowering the interest rate in the overall savings market . This all indirectly benefits the ntma it is all positive feedback loop.

For example in the UK where you have a very favourable investment taxation environment with generous tax free allowances for cgt and no dividend taxes, the UK has to offer much higher interest rates in order to attract investors in state savings. It is 180 degrees the opposite situation here and that all benefits the ntma
 
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