Dáil Éireann díospóireacht - Wednesday, 26 Jan 1994

Written Answers. - Post Office Savings Certificates.

Ivan Yates

Ceist:

191 Mr. Yates asked the Minister for Finance his views on whether the current rate of return on Post Office Savings Certificates is distorting deposit rates and a valid reason for some financial institutions not lowering interest rates; and if he will make a statement on the matter.

Minister for Finance (Mr. B. Ahern)

The interest rates paid on the Government's personal savings schemes are reviewed regularly by the National Treasury Management Agency. Following recent reductions in bank and building society deposit rates, and on the recommendation of the NTMA, I agreed to the withdrawal of the current 11th issue savings certificates with effect from close of business yesterday, Tuesday, 25 January and its replacement with a new issue of savings certificates, the 12th, which will be launched tomorrow. The 11th issue pays 40 per cent after five years; the new 12th issue will pay 40 per cent after five years and nine months. This is an effective reduction of 1 per cent per annum, from 7 per cent to 6 per cent.

Savings certificates are a medium to long term investment and are not, therefore, directly comparable with deposit accounts. In any event, I am advised by the National Treasury Management Agency that, on the basis of the latest figures available to them, the principal amount invested in the Government's personal savings schemes was the equivalent of 12 per cent of all deposits at end November 1993. The corresponding figure at end-1991 was 13 per cent. In the circumstances the evolution of market share over the past two years would not support the view that the current rate on Post Office savings certificates, the main Government personal savings scheme, is distorting deposit rates. Neither does it support the view that it provides a valid reason for some financial institutions not lowering their interest rates.