# State Savings Rates Cut: Full Details



## Lightning (16 Dec 2012)

The Sunday Times are reporting that a State Savings rate cut is coming this week.


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## Lightning (16 Dec 2012)

*Update and full details. *

The rate cuts are going to apply from today !!

Thanks to Brendan for forwarding on the below [broken link removed]. 



> National Treasury Management Agency announces new issues of State Savings products and changes to rates
> 
> Midday Sunday 16 December 2012 – The National Treasury Management Agency (NTMA) has today announced new issues of its range of State Savings products, which are available through An Post in any post office.
> 
> ...


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## Lightning (16 Dec 2012)

Some big cuts especially to the 30 day notice account. 

I will update the best buys later today.


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## granny (16 Dec 2012)

*state savings*

Hi Ciaran 
If I have already a savings bond can I top it up at the old rates. I also feel quite annoyed at the state savings doing this for one simple reason and it's this, People like myself and others have bailed out the bank through our tax money being shoveled into them and I feel the ntma should have kept their rates so that these banks would have to compete, this is the only way tax payers and ever going to get anything back from the banks.


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## The Ghoul (16 Dec 2012)

> If I have already a savings bond can I top it up at the old rates.


No, each bond, cert or Solidarity Bond is its own fixed term deposit and the interest is whatever the current rate is. 

The process for buying additional Solidarity Bonds can give the impression of giving a top up facility however this is not the case. Each time you "put money into a Solidarity Bond" you're buying a new one, not topping up an existing one.


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## theresa1 (16 Dec 2012)

If you stick an application in the post today - worth a shot?


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## The Ghoul (16 Dec 2012)

theresa1 said:


> If you stick an application in the post today - worth a shot?


No, there is no possibility of getting the old rates if you post today.


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## Sue Ellen (16 Dec 2012)

The Ghoul said:


> No, there is no possibility of getting the old rates if you post today.



From above:

'All applications for purchases received in a post office or *mailed prior to 16 December 2012* will receive the old rates'

Anything posted to-day will have to-day's or tomorrow's date stamp on them.


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## mcriot29 (16 Dec 2012)

So the 10 year bond is now 35 bonus not 40


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## mcriot29 (16 Dec 2012)

Are they still tax free or what ??


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## theresa1 (16 Dec 2012)

3,5 (old 5.5 cert )and 6 year products are still DIRT free.


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## The Ghoul (16 Dec 2012)

Re: prize bonds, does "2.25% of total value of all prize bonds outstanding" constitute a cut in the "rate of interest". Was this percentage a higher figure previously? I have had a quick look online but haven't found anything.

I know many people here do not like prize bonds and the 2.25% "average" interest rate is probably misleading and skewed by the tiny number of very big prizes. But still, with other State Savings rates and bank rates dropping and DIRT gone up, Prize Bonds are looking a bit better.


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## theresa1 (16 Dec 2012)

Yes 3%.


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## Lightning (16 Dec 2012)

The [broken link removed] website is now appears to be fully up to date with the new products, it was part updated when I looked earlier.


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## Abbey_Street (16 Dec 2012)

I've recalculated the gross AER equivalents for these products as follows:

* 3 Year Savings Bonds: 3.55%
* 4 Year National Solidarity Bond: 3.97%
* 5 Year Savings Certificate: 4.45%
* 10 Year National Solidarity Bond: 5.55%
* Instalment Savings: 4.54%

If someone could verify these, it would be appreciated?

Assumptions:
1. Tax on deposit interest is 33% in year 1 and 37% thereafter (deposit interest becomes eligible for PRSI in 2014).
2. Annual interest on National Solidarity Bond is not re-invested.

On the face of it, these rates don't look too bad relative to the rest of the market. However the question will be whether people are willing to stomach these low rates in return for taking the reasonably high risk involved in locking money for these periods (i.e. inflation, lack of liquidity). The early exit penalties are much heavier now (e.g. 0.7% interest in year 1 on savings bonds versus 2.2% previously).


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## Lightning (16 Dec 2012)

To avoid constantly having to re-weight the grossed up rates as PRSI looms, I have taken 37% as the notional tax rate for deposit interest as PRSI will be applied to normal deposit interest during most of the term. 

Taking 37% as the notional deposit interest tax rate:
3 years: 2.82%/63 = 3.62% grossed up AER.  
4 years: 2.57%/63 = 4.10% grossed up AER. 
5 years: 2.83%/63 = 4.49% grossed up AER. 
10 years: 3.55%/63 = 5.63% grossed up AER.

Another method would be to weight 30% by the number of days left in 2012, weight 33% by 365 days (and constantly update it as 2013 progresses) and 37% by the remainder of the term (which might have higher rates anyway in 2014+). 

37% seems a fair enough way to gross it up.


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## sebadoh (16 Dec 2012)

granny said:


> Hi Ciaran
> If I have already a savings bond can I top it up at the old rates. I also feel quite annoyed at the state savings doing this for one simple reason and it's this, People like myself and others have bailed out the bank through our tax money being shoveled into them and I feel the ntma should have kept their rates so that these banks would have to compete, this is the only way tax payers and ever going to get anything back from the banks.




Banks were losing money on the rates that they were charging, its only over the last year that statev savings have become competitive. Disappointing to see rates cut with immediate effect. It is going to be very hard to get an account now that will keep ahead of inflation


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## mcriot29 (16 Dec 2012)

39% total tax so from jan 2014 dirt will be 35% and prsi 4%, from 2015 i expect prsi at 5 and dirt 35 so total 40%


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## sebadoh (16 Dec 2012)

mcriot29 said:


> 39% total tax so from jan 2014 dirt will be 35% and prsi 4%, from 2015 i expect prsi at 5 and dirt 35 so total 40%



It now appears that the government doesnt want people to save and instead spend all their money


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## mcriot29 (16 Dec 2012)

Above is dirt prediction for 2014 35% rise of 2%


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## Lightning (16 Dec 2012)

sebadoh said:


> Banks were losing money on the rates that they were charging, its only over the last year that statev savings have become competitive. Disappointing to see rates cut with immediate effect. It is going to be very hard to get an account now that will keep ahead of inflation



Agreed but inflation is dropping like a stone across Europe at the moment.


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## mcriot29 (16 Dec 2012)

Yeah next step will be to raid are savings


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## ardmacha (16 Dec 2012)

**!#@!! 

I thought they'd cut on Jan 1!


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## amadain (16 Dec 2012)

The old rate of 3.23% is NOW DOWN TO 2.28% - A CUT OF 0.95%.


STATE SAVINGS BONDS 

3 Years 3.23% (A normal deposit account would need to be paying **4.61%* to match this rate because this product is not subject to DIRT at 30%.)


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## Lightning (16 Dec 2012)

amadain said:


> The old rate of 3.23% is NOW DOWN TO 2.28% - A CUT OF 0.95%.



The scale of cuts are large. The NTMA rarely review rates, but when they do the movements can be significant. 

The biggest drop, which the press release tries to hide, is the whopping 2.00% drop in the 30 day notice account to 1.00%.


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## mcriot29 (16 Dec 2012)

The 10 year bond is a very good rate still


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## theresa1 (17 Dec 2012)

I remember having a Deposit Account Plus account when it had a lower DIRT rate than the normal rate at the time - 1% now - joke!


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## Lightning (17 Dec 2012)

Some further thoughts on these changes ...

It was poor practice by the NTMA to not give 2 months notice of the rate changes on their instant access and 30 day notice account. This is something that banks are required to do. 

Also, the NTMA did not clearly state the comparable old AER for their instant access account and 30 day notice account in notices about the change. This is something that banks are required to do and is good practice. 

There is no reason for anyone, who cares about a return on their money, to keep open the NTMA instant access or 30 day notice account. 

The NTMA 3.00% for 30 day notice was propping up instant access, notice account and short term deposit market. Hence, rates are now likely to drop on banks deposit products. 

The ball is now seems to be in PTSB's court to cut rates. PTSB have the highest regular saver, highest 1 year term deposit, highest children/teen savings rate and some of the highest notice account rates.


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## theresa1 (17 Dec 2012)

I agree with everything you say CiaranT and I am lucky that i managed to shift all my money from AIB Direct (was with Anglo and transferred over). I have a few thousand more I was going to put in the 5.5 cert - now its a 5 year cert but because of the rate drop I might go with the 10 year bond. Another problem we are now faced with is the PRSI from 2014 and not actually knowing how this is going to work. Maybe we could escape the PRSI if we only go with DIRT free products e.g. 3,5,6 year product and be hit on 4 and 10 year bond products but we just dont know. It's a totally unsatisfactory situation to be in.


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## Eboneezer (17 Dec 2012)

Was standing at the counter this morning with forms filled out & bank draft in hand....
Couldn't believe it when they said rates had changed over the weekend...
Late as per usual to jump on the bandwagon..


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## InfoSeeker (17 Dec 2012)

I completed a 5.5yr certificate on Friday but they said that as it was a joint account that both myself & my wife's signature has to be witnessed on a anti money laundering form. I signed it but I was on my own and he gave me the receipt with the certificate number but asked me to tell my wife to pop in on Saturday to sign her form. She was not able to but will do so later this week, any thoughts on what rate I will get, presume the old rate as I got the certificate reference number on Friday?


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## theresa1 (17 Dec 2012)

Once you have the green official receipt and your wife signs her form as promised you will get the old rate.


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## The Ghoul (17 Dec 2012)

Commiserations to those who didn't or weren't in a position to fill their boots before the cut. 

Once articles about the IBF lobbying for a rate cut started appearing in the newspapers it was probably inevitable. To be honest, CiaranT has posted a few times about this in recent weeks so we were well warned.

I wonder how much has flowed into State Savings this year and how much of that flow is a direct result of threads on AAM such as Ciaran's Best Buys and my "State Savings looking good" thread 

One other thing to say is that the new rates are still fairly good and just because the 17th cert issue lasted 5 years doesn't mean that the 18th will last that long. There could be another cut. In 1998, there was only 6 months between savings cert issues.


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## Lightning (17 Dec 2012)

Thanks The Ghoul. You have given your fair share of good State Savings tips here too. 

Hopefully a few people spotted and benefited from the early warning signs here. The deposit rates are unfortunately on a significant downward curve at the moment. If you think it will continue on this curve, and I certainly do, then the only strategy is to lock into term deposit rates that may not have a long shelf life. Again, I would guess that the PTSB 3.06% 1 year term deposit rate wont last for too long.



The Ghoul said:


> One other thing to say is that the new rates are still fairly good and just because the 17th cert issue lasted 5 years doesn't mean that the 18th will last that long. There could be another cut. In 1998, there was only 6 months between savings cert issues.



Interesting. I would be very surprised if the NTMA alter rates again in the near future.


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## Daddy (18 Dec 2012)

The threads helped me big time make a decision and I went in big on budget day on 3 yr and 5.5 yr products.  I was a long time deciding as I was and still do worry abourt lending to a bankrupt.  But sure I went with it in the end.

when will we know for absolute certainty if PRSI will or will not apply to these products.

Thanks


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## theresa1 (18 Dec 2012)

I would imagine that the products that are DIRT free would stand a better chance of having no PRSI but this is just a wild guess. It's incredible that state savings launch new issue's of products -some very long term 10 years and you have to try to decide will you put money in on factors unknown, which in the 4 and 10 year bond you get hit by DIRT and maybe soon you will get hit with PRSI.


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## dub_nerd (18 Dec 2012)

If you file a tax return, do you have to even mention DIRT-free income from state savings? I know there is an entry on the Form 11 for "deposit interest on which DIRT has not been paid" but not sure if you are supposed to mention allegedly tax-free state savings here. If not, I don't see how they would levy the PRSI, but perhaps you do have to mention it ... does anyone know?


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## The Ghoul (18 Dec 2012)

Somewhat off topic comment, I've just noticed the following text in the new Solidarity bond brochure.



> Holdings in Series 1 of the National Solidarity Bond do not
> count towards the limits in this 2nd Issue.


 
Does this also apply to the savings certs and bonds?

I never considered this - I thought that the State Savings limits were per product, not per product issue.


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## rover (18 Dec 2012)

I have a Brochure for Savings Certs 17th Issue and Savings Bonds 12th Issue that contains the following.

Individuals are subject to a maximum €120,000 .... 

"Except when the holder subsequently purchases or seeks to purchase further Savings Bonds, the following shall not be taken into account for the purpose of these maximum holdings:
- Inherited Savings Bonds
- Savings Bonds Purchased by reinvesting the proceeds, or part of the proceeds, of maturing Savings Bonds, Savings Certificates, or Instalment Savings"

The same applies to Saving Certificates. 

As far as I can remember similar wording appears in the letter you receive when savings are maturing.


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## theresa1 (19 Dec 2012)

Basically on the 4 and 10 year bond if you put €250,000 in each one i.e. €500,000 you can do another €500,000 in the 2nd issue. The 3rd issue if we ever have one is years away i would suspect.


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## oldtimer (19 Dec 2012)

The Ghoul said:


> Somewhat off topic comment, I've just noticed the following text in the new Solidarity bond brochure.
> 
> 
> 
> ...


They are per product issue.


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## slumdogz (19 Dec 2012)

The 10 year bond still looks fairy good compared to what else is out there at this moment ,but what are the chances of interest rates doubling in the next 5 or 6 years and trapping you in a 10 year bond with a rate that is not so great anymore?


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## Lightning (20 Dec 2012)

slumdogz said:


> The 10 year bond still looks fairy good compared to what else is out there at this moment ,but what are the chances of interest rates doubling in the next 5 or 6 years and trapping you in a 10 year bond with a rate that is not so great anymore?



There is no simple answer as to the direction of rates over the next 10 years. It is a very long time horizon and difficult to forecast that far into the future.


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## hhobbit (5 Mar 2013)

I am angry at finding out only today, on receipt of the annual statement, that "deposit account plus" is down to 1% from 3% since 16/12/12, and I was not notified of a change that will cost me a lot.

How dare An Post/NTMA treat us so high handedly? Only there is a politeness requirement on this site I would vent a lot more. 

 But now my anger is focusing - what chances of a challenge via the financial ombudsman?  Are we mad to trust them?  Maybe gold seems a better bet even at its present price. FWIW I don't own any gold so am not touting just thinking.


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## Lightning (5 Mar 2013)

It is normal for banks to give 2 months advance notice for rate changes on instant access and notice accounts. Normally. It does not always happen. 

A rate change is typically put in a newspaper and not notified to each customer. 

The NTMA did not give any major advance notice of the rate changes. They did place ads in the newspapers. They did not, like banks, give advise each customer. 

Hence, what the NTMA did, by not notifying each customer, is reasonably normal. Not saying it is right. 

Anyway, switch.


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## hhobbit (8 Mar 2013)

@ CiaranT thanks this is what I set them:

Dear Sirs
I have the above account jointly with my wife.  I was happy enough
with the 3% interest rate before DIRT that it was earning.  I was
dismayed on reading your leaflet the rate was  reduced without direct
notification to us, to 1% on 16th December last.  That represented a
gross reduction of about €40 p.w. since that date.

I am very dissatisfied at your lack of direct communication of the
reduction.  I have lost faith in your reputation for fair dealing with
your savers. I have no interest in your other products, and wish to
make a formal complaint concerning your business conduct.  I request
reinstatement of the interest rate to 3% pending account closure.  I
request closure  and full refund regardless of the outcome of this
complaint and request.

Failing a satisfactory resolution of my complaint, I intend to pursue
the matter further, specifically first making a complaint to the
financial ombudsman.

Kindly advise receipt by email, and advise your contact details by return,

Yours faithfully


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## seantheman (8 Mar 2013)

hhobbit said:


> Yours faithfully


 
Ye forgot to sign it, how are they gonna know who you are?


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## Lightning (8 Mar 2013)

@hhobbit fair play to you for speaking up against how banks fail to adequate efforts inform customers of rate changes. However, you have no chance of getting 3% applied post rate change. Time to switch.


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## hhobbit (8 Mar 2013)

I hope their reply to me will be interesting, likewise that of the ombudsman.  I better advise them I intend to make public their reply.  And in this day and age of dinternet there is no excuse for their poor communication, any reference to security would be a self serving PoS answer.


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## dub_nerd (8 Mar 2013)

I don't think you have much chance of getting anywhere with your complaint.

But as general advice for anyone shopping around for rates, go the Deposit Best Buy threads on this site, use the "Thread Tools" menu at the top of the page to subscribe to the thread, and you will get e-mails whenever there are new posts.

Personally, I am only interested in the lump sums thread, and I am subscribed there. This mechanism works because Ciaran T religiously updates the thread with a notification any time any of the rates change, so let me take this opportunity to thank you very much indeed for this most valuable service.


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## Lightning (9 Mar 2013)

Thanks for the kind words Dub_Nerd. Good to see that people are making use of the subscribe to thread feature to get updates.


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## hhobbit (9 Mar 2013)

I'll second that, have also subscribed.


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## boe (22 Mar 2013)

Hi All,

I am a bit behind the times and have only just seen the rate change. I have a 3 year cert expiring in June and had intended topping it up and re-committing to another 3 years. I presume this will mean the cert gets re-issued so I get the lower rate? If you just roll your money over and re-invest, then its the new rate you get?

Thanks


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## oldtimer (22 Mar 2013)

boe said:


> Hi All,
> 
> I am a bit behind the times and have only just seen the rate change. I have a 3 year cert expiring in June and had intended topping it up and re-committing to another 3 years. I presume this will mean the cert gets re-issued so I get the lower rate? If you just roll your money over and re-invest, then its the new rate you get?
> 
> Thanks


Correct. Maturing cert finishes in June. You cannot rollover. Any new investment will be at new rate.


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## AgathaC (23 Mar 2013)

dub_nerd said:


> But as general advice for anyone shopping around for rates, go the Deposit Best Buy threads on this site, use the "Thread Tools" menu at the top of the page to subscribe to the thread, and you will get e-mails whenever there are new posts.
> 
> Personally, I am only interested in the lump sums thread, and I am subscribed there. This mechanism works because Ciaran T religiously updates the thread with a notification any time any of the rates change, so let me take this opportunity to thank you very much indeed for this most valuable service.



I have always found this thread very useful, I don't have much to save,but it's important to make the best of things. Well done,Ciaran T on your hard work here.


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## theTinker (23 Mar 2013)

Couldnt Agree more. That thread is practically my entire financial plan. Its a great time saver and incredibly useful. Thanks Ciaran!


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## dub_nerd (24 Mar 2013)

theTinker said:


> Couldnt Agree more. *That thread is practically my entire financial plan.* Its a great time saver and incredibly useful. Thanks Ciaran!


 
Hadn't thought about it that way ... but mine too


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## Lightning (24 Mar 2013)

Thanks guys, glad you get use from the best buy threads. Any feedback to make the best buys better is welcome.


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## The Ghoul (24 Mar 2013)

Yeah, thanks CiaranT. The best buys were particularly useful when interest rates seemed to be going up on a weekly basis despite low inflation. Great fun was had moving money around and rooting behind the sofa looking for spare cash to take advantage of new deposit rates!

Personally I used to be extremely lazy about shopping around for good rates, had 100k in a current account at one stage. AAM knocked that out of me.


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## boe (26 Mar 2013)

oldtimer said:


> Correct. Maturing cert finishes in June. You cannot rollover. Any new investment will be at new rate.


 
Thanks oldtimer


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