It's a great time to be a saver

It is a great time to save money in Ireland, writes BARRY MCCALL– and for those for whom this is an option, there is lots of choice to boot

IRISH SAVERS ARE being rewarded with high interest rates on a range of flexible accounts, with few of the onerous restrictions of some of their competitors. Depositors are benefiting from a fairly unique set of market conditions which are leading to the financial institutions frequently paying out more interest on a deposit than they are taking in on loans.

This is largely because of the new targets for the main Irish banks which have been set by the Central Bank. These targets will see both AIB and Bank of Ireland reduce their ratio of lending deposits from a current level of well over 150 per cent to just 122.5 per cent by 2013. In order to achieve this, the banks will have to reduce their loan books in certain areas as well as increase their deposit holdings – with the competition for deposits leading to some very attractive rates.

And Irish savers have been responding enthusiastically – savings in State-backed products such as the National Solidarity Bond have more than doubled since 2007 to €14.5 billion from €6.24 billion. In addition, Irish-resident private-sector deposits at all banks operating in Ireland rose by €798 million to €92.1 billion during the month of March alone.

One of the banks benefiting from this increase has been KBC Bank, which, while not being an Irish bank, is still covered under the Government guarantee scheme for deposits of up to €100,000. “We’ve been in Ireland for the past 40 years and have been principally known as a mortgage lender,” says Dara Deering, head of retail banking with KBC Bank. “We looked at the deposit market a year-and-a-half ago and, since then, we have taken in more than €1 billion from 15,000 customers. In fact, we have signed up 5,000 new customers this year alone.”

She believes the bank’s rapid success in this area is in part due to its established presence in Ireland – with five offices in Dublin, Cork, Galway, Limerick and Belfast – as well as its innovative product offerings. “We were the first bank to allow people to access their funds without penalty,” she says. “We recognised that more and more people need to dip into their savings to meet unexpected costs. We also have a very strong online channel, with a very easy-to-use account opening process. Approximately 30 per cent of our savings accounts have been opened online.”

The latest Quarterly Savings Barometer from KBC underlines the importance of access to funds among savers with the majority of respondents (34 per cent) saying they dipped into their savings twice or three times a year, while 20 per cent of respondents dipped into their savings more than five times in the last year,

“People are dipping into their savings more regularly, but they also want to be able to top up again when they have some extra cash,” says Deering.

“The top three features sought by savers are the ability to access funds, the interest rate offered and the ability to add additional funds to the account. We’re now launching a new Top-Up deposit account with all these features to give savers greater freedom in how they manage their savings. With a very competitive 4.1 per cent AER gross deposit rate over 12 months, as well as the flexibility to lodge or withdraw up to 25 per cent of funds during the term, the account will be very attractive to savers.”

AIB’s Flexi Deposit Account also offers the flexibility to access funds. Customers can decide on one of eight terms from two to 24 months and during the term they have the flexibility of being able to access up to 50 per cent of their total funds in one withdrawal, without incurring any bank charges or penalties.

Bank of Ireland’s Fixed Term Advantage Deposit Account is available for terms of between three and 24 months and offers interest rates of up to 3 per cent AER. In addition, savers can withdraw up to 10 per cent of their funds in a single lodgement during the term of the account.

But comparing the features of accounts with different terms, different interest rates and different sets of conditions can be quite confusing. This is where the National Consumer Agency's It's Your Money service comes in ( itsyourmoney.ie). It allows you to easily compare the offerings from the different institutions by entering the amount you have to save, the type of account you require and the amount of notice you would need to withdraw your money.

Another excellent resource is Money Guide Ireland ( moneyguideireland.com) which monitors the interest rates offered by banks on various types of deposit account. According to the site, the best instant access deposit account rates in Ireland at the moment are available from KBC at 3.25 per cent; AIB Direct Easy Access Reward Account at 3.1 per cent; RaboDirect at 3.1 per cent (online only); and Ulster Bank Direct Saver at 3.1 per cent.

These rates are subject to change, of course, and institutions are constantly innovating and coming up with new products and offers so it is always wise to shop around before settling on a home for your hard-earned cash.