‘Ireland’s returns are underwhelming’
Savers in this country have been getting some of the lowest return in the eurozone over the past 10 years.
Depositors remain at the bottom of the pack across the two major deposit categories – instant-access overnight accounts and fixed-term deposits, according to a survey compiled by savings platform Raisin.
Overnight deposits – sometimes called “easy access” – are the most common form of savings accounts in Ireland.
Nine out of every €10 in savings is held in these accounts.
Over the past year, Irish savers received an average return of just 0.13pc. The Raisin Bank analysis said this puts Ireland among the lowest in the eurozone for returns on demand deposits.
German savers could avail of much better average rates of 0.55pc.
Savers in this country fare slightly better on term deposit accounts, where money has to be locked away in a savings account for a period to get the full interest rate quoted.
Raisin said: “But even here, Ireland’s returns are underwhelming.”
The average Irish household received 2.44pc interest on new term deposits over the past year. This is compared with 3.06pc in Italy.
Over the past 10 years, Irish savers had seen the lowest annualised returns of all countries surveyed, at 0.62pc, the Berlin-based bank said.
Raisin said the loyalty of savers in this country to overnight accounts may be rooted in years of ultra-low or no returns, when moving money did not pay off.
“But the interest rate landscape has shifted. Term deposit rates have risen across the EU, and online banks are offering competitive deals that many in Ireland continue to overlook,” Raisin said.
Holding on to bad savings habits is costing Irish households millions of euro a year in missed interest.
The Central Bank recently revealed Irish households missed out on €800m in deposit interest last year alone.
Eoghan O’Hara, country head for Ireland at Raisin, said low competition in the Irish retail banking sector may be a key factor in low rates. “With only a handful of major players, and limited switching between banks or even account types, there’s little incentive for institutions to offer competitive rates. In contrast, countries with more diverse banking landscapes, such as Germany, have passed on more value to savers.”
"It’s the digital equivalent of stuffing it under the mattress"
He warned that Irish savers were being left behind, not only in relative terms, but also in real returns.
“In a high-inflation environment, earning little to no interest in an overnight savings equates to a negative real return and a loss of spending power.”
He said that when Dirt (deposit interest retention tax) is accounted for on the earnings, the net result is even worse.
“Keeping money in a low-paying, overnight account is essentially the digital equivalent of stuffing it under the mattress. It may feel safe, but your spending power is eroding,” Mr O’Hara added.
There is about €160bn in household savings in Irish banks.
Mr O’Hara said savers should ensure their money was working harder for them. They should explore the options and if possible lock away their money in a fixed-term deposit where they can get a much better rate.
He also advised people to shift their savings to a bank that offers higher rates, and to look for serious offers in other EU countries.