Irish Savers Face Dismal Returns as Eurozone Rates Climb

Savers in Ireland are experiencing some of the lowest returns on deposit accounts within the eurozone, as highlighted by a recent analysis from savings platform Raisin. Over the past decade, Irish depositors have lagged behind their eurozone counterparts, particularly in the two main deposit categories: instant-access overnight accounts and fixed-term deposits.

A staggering 90% of savings in Ireland is held in overnight accounts, which are often referred to as “easy access.” In the past year, these accounts yielded an average return of just 0.13%, placing Ireland among the lowest in the eurozone for returns on demand deposits. In contrast, savers in Germany enjoyed average rates of 0.55%, significantly higher than those in Ireland.

The situation is slightly better for term deposit accounts, where funds are locked away for a specific period to earn interest. Irish savers received an average interest rate of 2.44% on new term deposits over the last year, compared to 3.06% in Italy. Over the last decade, the annualized returns for Irish savers have been the lowest of all surveyed countries, averaging just 0.62%, as reported by the Berlin-based Raisin.

According to Raisin, the preference of Irish savers for overnight accounts may stem from a prolonged period of ultra-low or nonexistent returns, leading many to believe that moving money would not yield better results. The report noted, “But the interest rate landscape has shifted. Term deposit rates have risen across the EU, and online banks are offering competitive deals that many in Ireland continue to overlook.”

Irish households collectively missed out on €800 million in deposit interest last year alone, as revealed by the Central Bank of Ireland. Eoghan O’Hara, country head for Ireland at Raisin, pointed to a lack of competition within the Irish retail banking sector as a significant factor contributing to low rates. “With only a handful of major players and limited switching between banks or account types, there’s little incentive for institutions to offer competitive rates,” he stated. He emphasized that countries with more diverse banking options, such as Germany, have been able to provide greater value to savers.

O’Hara warned that Irish savers are not only falling behind in relative terms, but are also experiencing negative real returns. “In a high-inflation environment, earning little to no interest in an overnight savings account equates to a negative real return and a loss of spending power,” he said. After accounting for the deposit interest retention tax (Dirt), the situation worsens, further eroding the value of savings. He likened keeping money in a low-paying overnight account to the digital equivalent of “stuffing it under the mattress,” noting that while it may feel secure, it ultimately diminishes purchasing power.

Currently, there is approximately €160 billion in household savings held in Irish banks. O’Hara urged savers to take proactive steps to ensure their money is working harder for them. He recommended exploring various options, including locking funds into fixed-term deposits that offer better rates. Additionally, he advised individuals to consider shifting their savings to banks that provide higher interest rates and to seek out attractive offers available in other EU countries.

As the interest rate environment continues to evolve, it remains crucial for Irish savers to reassess their financial strategies to avoid missing out on potential earnings.