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We're a nation of savers despite low interest rates (Irish Independent)

04 November 2011
Three out of four people intend to keep up the savings habit despite their incomes being hit hard by tax hikes, pay cuts and job losses, a new survey shows.

The survey results emerged yesterday after Anglo Irish bank slashed the interest rates it pays its savers.

The nationalised bank said its regular saver rate has dropped from 7.3pc to 6.5pc, while its demand deposit rate is down from 4.75pc to 4.25pc.

But financial experts said that even after the cuts Anglo Irish Bank was still paying the highest rates on deposits in the market.

Other banks that have reduced their rates in the past few days include AIB, Investec and RaboDirect.

Deposit takers are responding to the decision of the European Central Bank to cut its interest rates for the sixth time earlier this month.

Savers were also hit earlier this month when Finance Minister Brian Lenihan increased the retention tax on deposits to 25pc.

But despite falling rates for savers and higher deposit interest retention tax (DIRT), consumers plan to step up their saving.

A survey carried out for Halifax Bank shows that 73pc of people plan to save over the next two to three years.

And more than half of those surveyed said they intend to save as much as €200 a month.

When asked what piece of advice they wished they had been given 10 years ago, almost a third of respondents said they wish they had been advised to save.

Almost two-thirds of people claim to save on a regular basis, with just 14pc of respondents opting for once off, lump-sum saving.

Two-thirds claim to be saving on a monthly basis and, of those, they are savings on average 14pc of their income.

Of those saving on a monthly basis, 63pc of survey respondents are opting for demand accounts with just less than one in three choosing longer, fixed term savings options.

There are a number of factors that influence what institution consumers choose when opening a savings account.

Just a third of consumers said they made a decision on what type of savings account on the basis of the interest rate. But a quarter said they chose a deposit taker on the basis of the security of the institution.

The fact that a majority of people opt for demand deposit accounts, where you get instant access to your money, means they are likely to be losing money.

This is because many demand deposit accounts have interest rates below 1pc at the moment. But rates of 4.9pc are available to those who lock money away for a fixed period.