Why saving with An Post is now much less attractive

The organisation has slashed interest rates on deposit accounts...

An Post savers are now looking at poorer returns on their deposits as the National Treasury Management Agency (NTMA) announced over the weekend that it is slashing interest rates.

Cuts have been made to deposit rates, as well as the rates available on new long-term savings products.

The interest rate on normal demand deposit accounts has fallen from 0.25% to 0.15%.

Not only that, An Post is abolishing its popular 'deposit account plus'. The product had offered savers a return of 0.5% on the basis that they gave 30 days' notice before withdrawing savings.

The new 0.15% will apply to funds in these accounts going forward, and the notice period will no longer apply.

The move means there are now even less options for savers at a time when returns are at a real low. It reflects falling international interest rates, and also the fact that the NTMA can access funds cheaply on world market, meaning there is less need to attract small savers at home.

While people signed up for longer-term fixed interest rate savings – savings bonds etc – will continue to get the agreed return until the end of their term, new savers will see rates severely slashed.

Three-year savings bonds will now reap an annual equivalent return (AER) of 0.33%, down from 0.83%.

The AER on the four-year solitary bond is down from 0.99% to 0.5%, while the return on five and six year products is down from 1.24% to 0.98%.

If you're prepared to wait a decade for your solitary bond to mature, you are now being offered 1.5%. That's down considerably from 2.26%.

According to the Irish Times, banks have complained that the returns available from An Post make it more difficult for them to attract savings.

Savers moved €370 million into An Post last year. The total amount held in An Post products is currently almost €17 billion.

An Post rates were last cut in October 2014.

NTMA's new An Post rates look set to result in banks lowering their own deposit returns.