# New State Savings Rates



## Lightning (24 Jan 2021)

Effective 24 January, the NTMA have reduced some of their State Savings rates. 

Changes: 
- 5 year rate is now 0.59% AER tax free. 
- 6 year rate is now 0.63% AER tax free.
- 10 year rate is now 0.96% AER tax free.
- The Deposit Account now pays 0.05% AER gross. 
- The Prize Bond fund is now 0.35%. 

Rates are so low now the new NTMA rates still remain competitive. 

State Savings rates are well above sovereign bond yields. 

Surprised to see the NTMA make the announcement on a weekend that is not a long weekend as per what they normally do.


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## cbreeze (25 Jan 2021)

Love to know what platform they make their announcements on - would it be Iris Oifiguil or a press release to media.  I knew this was going to happen sometime, though.


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## Lightning (25 Jan 2021)

The announcement is made in the State Savings website, via press advertisements and via press releases.


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## Ryan (25 Jan 2021)

What does this mean for Prize Bonds?


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## Freelance (25 Jan 2021)

Ryan said:


> What does this mean for Prize Bonds?


The notional interest rate which is the basis for the prizes has dropped from .5% to .35%. The prize structure changed by the elimination of the 2x€1m prizes which are replaced with 4x€250k prizes. The number of €50 prizes will drop significantly.


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## Duke of Marmalade (29 Jan 2021)

Freelance said:


> The notional interest rate which is the basis for the prizes has dropped from .5% to .35%. The prize structure changed by the elimination of the 2x€1m prizes which are replaced with 4x€250k prizes. The number of €50 prizes will drop significantly.


OMG Joe Duffy making this out to be an enormous scandal.


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## Sarenco (29 Jan 2021)

Duke of Marmalade said:


> OMG Joe Duffy making this out to be an enormous scandal.


So you weren't the caller Duke?


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## Duke of Marmalade (29 Jan 2021)

Ah  Jayz!  Guy doesn't want to give his bank account details,  What's he afraid of, receiving phantom transfers?  Then we have a Cork lady extremely  irate that when she wins they don't tell her which Prize Bond won


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## Cricketer (29 Jan 2021)

Duke of Marmalade said:


> Then we have a Cork lady extremely  irate that when she wins they don't tell her which Prize Bond won


Incredible. She wasn't claiming that most of the winners were from Dublin?


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## Tony40 (31 Jan 2021)

They have also changed the early cash-in reduced rates on the ten year bond. It used to be that after 6 years, if you cashed a ten year bond out early it would be the equivalent return of a 5 year bond from the same starting point. I always thought this made the ten year bond more attractive than 2 x 5 year bonds running consecutively where it was likely that the second 5 year period would suffer a rate reduction (as it has done now).

After 8 years of the new bond you will receive the equivalent of a 5 year, so makes it less beneficial.


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## alwaysonit (3 Feb 2021)

CiaranT said:


> State Savings rates are well above sovereign bond yields.



I've always wondered why this is - I guess as only people with a PPS number can purchase them, and there is the 120k limit, it's a way to offer a higher rate to citizens and residents without the possibility of a huge foreign investment.

In other words, just a nice gesture to Irish people?


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## Lightning (3 Feb 2021)

alwaysonit said:


> I've always wondered why this is



I guess the justification is that the NTMA want more domestic holders of Irish sovereign debt. I think Ireland has a high percentage of foreign ownership of sovereign debt.


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## Timjoe (4 Feb 2021)

Are the winnings, if any, on prize bonds taxable?  As far as I remember, lotto winnings are not taxable.  Just wondering.


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## NoRegretsCoyote (4 Feb 2021)

CiaranT said:


> I guess the justification is that the NTMA want more domestic holders of Irish sovereign debt. I think Ireland has a high percentage of foreign ownership of sovereign debt.



Exactly.

Ireland was locked out of private debt markets 2010-2012. Only the EU and IMF would lend.

Retail investors (state savings, prize bonds) grew a lot in this period and were a very useful source of state financing.

IMO they will never cut rates below zero on these products.


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## gianni (4 Feb 2021)

Timjoe said:


> Are the winnings, if any, on prize bonds taxable?  As far as I remember, lotto winnings are not taxable.  Just wondering.


Prize bond winnings are tax free.


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## Duke of Marmalade (4 Feb 2021)

I don’t think State Savings are seen as primarily a source of funding.  Why have limits after all?  State Savings provide NTMA with 8.6% of its funding requirement.
So I see it as essentially a social service.  It also helps put manners on the retail deposit takers as otherwise they would have very soft funding from the large amounts of small savings, mainly in the hands of pensioners.


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## NoRegretsCoyote (4 Feb 2021)

Duke of Marmalade said:


> tate Savings provide NTMA with 8.6% of its funding requirement.



Well for the second half of 2010 and all of 2011 it was 100% of NTMA funding when you exclude the EU and IMF


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## Duke of Marmalade (4 Feb 2021)

NoRegretsCoyote said:


> Well for the second half of 2010 and all of 2011 it was 100% of NTMA funding when you exclude the EU and IMF


You are talking about new funding rather than the existing stock.  My guess is that during that period State Savings were withdrawing funding from NTMA as people like Jill Kirby talked about the measly returns compared to 14% p.a. in the bond market.
My main point is that I don't think funding is a major reason that we have State Savings and indeed at the present time it is an expensive form of funding.


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## NoRegretsCoyote (4 Feb 2021)

Duke of Marmalade said:


> My main point is that I don't think funding is a major reason that we have State Savings



Of course it is! Think back to the 80s. We were issuing in Dutch Guilders in double-digit rates! Local retail savings were cheaper and more stable.





Duke of Marmalade said:


> and indeed at the present time it is an expensive form of funding.



Indeed, but a bit like an investment strategy, diversification is good.


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## Duke of Marmalade (4 Feb 2021)

NoRegretsCoyote said:


> Indeed, but a bit like an investment strategy, diversification is good.


That's a new insight.  Possibly a gap for someone to put together the KBC/AIB/BoI/PTSB multi mortgage.


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## deco87 (18 Feb 2021)

CiaranT said:


> Effective 24 January, the NTMA have reduced some of their State Savings rates.
> 
> Changes:
> - 5 year rate is now 0.59% AER tax free.
> ...


I’m just reading about these state savings and prize bonds - lot of talk of impending negative interest rates -have  60 k to “invest” for 3 years - NO RISK - what would be best now ? No access required


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## Lightning (18 Feb 2021)

Not no risk but very low risk. 

Raisin.ie have the highest rates with certain offers but many may prefer the State Savings products.


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## NoRegretsCoyote (18 Feb 2021)

CiaranT said:


> Not no risk but very low risk.



Greece defaulted on tens of billions of its debt to institutional investors in 2012 but did not touch retail depositors.

State savings are not even low risk, they are ultra-low risk. There is literally no product for an Irish retail investor with lower risk.


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## deco87 (18 Feb 2021)

NoRegretsCoyote said:


> Greece defaulted on tens of billions of its debt to institutional investors in 2012 but did not touch retail depositors.
> 
> State savings are not even low risk, they are ultra-low risk. There is literally no product for an Irish retail investor with lower risk.


Oh I thought the state savings was government backed to 100 k ? As a consequence fully secure and safe - thanks a lot


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## EmmDee (18 Feb 2021)

deco87 said:


> Oh I thought the state savings was government backed to 100 k ? As a consequence fully secure and safe - thanks a lot



State savings are fully guaranteed... by the state. So when posters say they are "low but not zero" risk, they mean that you still have a country risk - that the country goes bust and defaults.

It's still a higher level of guarantee than the bank deposit guarantee you refer to


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## NoRegretsCoyote (18 Feb 2021)

EmmDee said:


> State savings are fully guaranteed... by the state. So when posters say they are "low but not zero" risk, they mean that you still have a country risk - that the country goes bust and defaults.



Ireland has about €226bn of debt. This includes €19bn of state savings held personally by Irish people in Ireland, and €142bn of government bonds held by institutional investors all over the world.

State savings are de facto senior to government bonds. I am pretty knowledgeable on this topic, and you would need a sovereign default on a spectacular scale (as in wiping out a large majority of the €142bn held by institutional investors) before a government would touch state savings.

Remember that there are hundreds of thousands of state savings holders, all of whom can vote. Confiscating even 10% of their €19bn would cause orders of magnitude more difficulty than just squeezing €2bn more out of a default on institutional investors.

It's not zero risk (nothing is) but it's as close as you can get.


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## deco87 (18 Feb 2021)

NoRegretsCoyote said:


> Ireland has about €226bn of debt. This includes €19bn of state savings held personally by Irish people in Ireland, and €142bn of government bonds held by institutional investors all over the world.
> 
> State savings are de facto senior to government bonds. I am pretty knowledgeable on this topic, and you would need a sovereign default on a spectacular scale (as in wiping out a large majority of the €142bn held by institutional investors) before a government would touch state savings.
> 
> ...


Thank you for taking the time to reply


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## Duke of Marmalade (19 Feb 2021)

NoRegretsCoyote said:


> Ireland has about €226bn of debt. This includes €19bn of state savings held personally by Irish people in Ireland, and €142bn of government bonds held by institutional investors all over the world.
> 
> State savings are de facto senior to government bonds. I am pretty knowledgeable on this topic, and you would need a sovereign default on a spectacular scale (as in wiping out a large majority of the €142bn held by institutional investors) before a government would touch state savings.
> 
> ...


That has always been my view and it is good to see it confirmed by someone who seems closer to the practical realities than me.  
I recall during the financial crisis when Irish bond rates hit double figures,  Jill Kirby berating the returns on State Savings as not reflecting value for default risk.  And the view that State Savings carry the same risk as government bonds is almost official orthodoxy in these parts.


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## Freelance (19 Feb 2021)

NoRegretsCoyote said:


> Remember that there are hundreds of thousands of state savings holders, all of whom can vote. Confiscating even 10% of their €19bn would cause orders of magnitude more difficulty than just squeezing €2bn more out of a default on institutional investors.


I'd agree that going after state savings would be the last of last resorts. If a few billion was all the government wanted from domestic resources it would be much more likely that a new pension levy would be introduced. The government tested the waters on this in 2011-2015 and raised €2bn over 5 years and scarcely a whimper was heard. It set a dreadful precedent. There must be a very real prospect of this being introduced after the next change of government in any event.


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## NoRegretsCoyote (19 Feb 2021)

The ten-year national solidarity bond offered in 2010 gave an absolutely stonking gross return of 50% over ten years.

I still regret not buying one.


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## camlin90 (19 Feb 2021)

Governments inflate more often than they default. So it's a question of what you can buy with the funds you get when the bond matures.

Once our eurozone counterparts keep paying for our lockdowns no worries


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## noproblem (19 Feb 2021)

NoRegretsCoyote said:


> The ten-year national solidarity bond offered in 2010 gave an absolutely stonking gross return of 50% over ten years.
> 
> I still regret not buying one.


Many have just had a happy covid Xmas and people wonder why there's so much cash out there with plenty more where that came from too.


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## Freelance (21 Feb 2021)

NoRegretsCoyote said:


> The ten-year national solidarity bond offered in 2010 gave an absolutely stonking gross return of 50% over ten years.
> 
> I still regret not buying one.


You and me both. Absolutely eye watering compared to what's on offer today. They had the added advantage that the return for a mid-late term "early" encashment was also pretty respectable so you weren't absolutely locked in for the term. I have a few of the later issue 10 year ones which pay 25% (No DIRT so Net).


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## fayf (23 Feb 2021)

I was lucky, got in at 50%, 45%, & 40%  and last ones we did were 25%, and have been maxing pensions as well. It was not only interest rates that attracted me, but no charges, no risk, and quick access to cash, if we needed it, which we didn't. We were also looking ahead, and wanted a steady steam of certain, and guaranteed cash lump sums, from mid fifties onwards. They start maturing in about 2 years.


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## Protocol (23 Feb 2021)

NoRegretsCoyote said:


> S*tate savings are de facto senior to government bonds.* I am pretty knowledgeable on this topic, and you would need a sovereign default on a spectacular scale (as in wiping out a large majority of the €142bn held by institutional investors) before a government would touch state savings.



Interesting. I have never seen that stated before.

Yet bonds offer lower yields.


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## Freelance (23 Feb 2021)

fayf said:


> I was lucky,.......


In fairness that is a lot more than luck. Good planning, good research and good timing. Take a bow.


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## NoRegretsCoyote (23 Feb 2021)

Protocol said:


> Yet bonds offer lower yields.


They haven't always though.


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## Duke of Marmalade (23 Feb 2021)

Protocol said:


> Interesting. I have never seen that stated before.


Well, I have been arguing that ever since the crisis when I had to rebuff arguments by the likes of Jill Kirby and senior folk in this very parish that they ranked _pari passu._
The mistake that was being made was in comparing a sovereign state to a corporation.  In a corporation there are rigid rules on subordination and the _de jure_ position is the _de facto_ position as well.  Thus our banks simply could not have defaulted on bondholders but kept depositors whole.
This is not true for a sovereign state or even if it was true they can always change the law; after all I presume it would need a legal enactment to default in the first place.
The counter argument that I faced was that the German bondholders, for example, would never tolerate being treated in a different way from State Savings, and could force _pari passu_.  That is a judgement call which I strongly reject.


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## NoRegretsCoyote (23 Feb 2021)

Duke of Marmalade said:


> In a corporation there are rigid rules on subordination and the _de jure_ position is the _de facto_ position as well. Thus our banks simply could not have defaulted on bondholders but kept depositors whole.


I heard this (anecdotally) too that senior bonds and deposits ranked pari passu under Irish law.




Duke of Marmalade said:


> The mistake that was being made was in comparing a sovereign state to a corporation.


People do this all the time, by talking about unfunded state pension liabilities and the like. It's nonsense. Like saying that the Naas Road resurfacing in 2048 is unfunded.

Don't forget the state has the almost infinite power to tax its future citizens to pay its obligations.

Ireland actually came *very* close to sovereign default exactly ten years ago. But Johnny and Mary's Prize Bonds were never going to be touched.


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## NoRegretsCoyote (3 Apr 2021)

Another reason why the state will never default on retail depositors.

Often people take half a century to look for their money back!


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## Silvera (27 Apr 2021)

I'm considering purchasing 6-Year Savings Certs. Apologies if this is a silly question... have I got this right?

The money you pay in has to stay put for 6-Years. So Year 1 savings stay put for 6 years  ....and Year 6 savings stay put for 6 years
So it will actually be *12 years* before all the savings have matured?


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## noproblem (27 Apr 2021)

Silvera said:


> I'm considering purchasing 6-Year Savings Certs. Apologies if this is a silly question... have I got this right?
> 
> The money you pay in has to stay put for 6-Years. So Year 1 savings stay put for 6 years  ....and Year 6 savings stay put for 6 years
> So it will actually be *12 years* before all the savings have matured?


Ah now, come on, tell us where you heard that wan?


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## huskerdu (28 Apr 2021)

There is no 6 year saving cert, do you mean the 6 year installment savings ?

If so, you save for a year and the money stays put for another 5 years ( 6years in total)
You don't add money in year 2-6. 
If you choose to open another one every year, then it works like this

Installment saving account 1 - Save in 2021, matures in 2026
Instlallment saving account 2 - Save in 2022, matures in 2027

These would be completely separate products with no link between them


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## Silvera (24 May 2021)

noproblem 

See above answer


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## noproblem (24 May 2021)

Silvera said:


> noproblem
> 
> See above answer


Already knew it.  Still doesn't answer my question to you though


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