Savers with An Post will face lower returns on new investments from today, following a decision by the National Treasury Management Agency to cut interest rates.

An Post administers and sells State savings products on behalf of the agency, which yesterday announced new issues of its range of fixed-rate State savings products and changes to the interest rate on its variable rate products.

The interest rates on these new issues represent a reduction of between 0.49 and 0.96 of a percentage point on the annual equivalent rates paid on the previous issue. That equates to a cut in fixed-rate total returns of three to four percentage points on most of its fixed-interest products.

The move comes following calls from the banks in recent months for a reduction in An Post interest rate.

Banks' perspective
The banks argued it was difficult for them to lower rates while the State savings rate was so high. They further said the high interest rates offered by An Post distorted competition and created an uneven playing field with regard to attracting deposit flows.

The Irish Banking Federation welcomed the decision to reduce rates: "The banking sector is interested in ensuring a broadly fair, competitive and level playing field on deposit rates as and between various institutions."

From today, the agency is offering a fixed-rate total return of 4per cent on the three-year savings bonds; 8 per cent on the four-year national solidarity bond; 11 per cent on the five-year savings certificate; 14 per cent on the six-year instalment savings; and 35 per cent on the 10-year national solidarity bond.

Existing investments
The agency said the rate reductions will have no effect on existing holders of savings bonds, savings certificates, instalment savings or national solidarity bonds, as those rates have already been fixed.

However, the agency also announced changes to the variable rate products which will have an immediate effect on prize bonds and the 30-day notice deposit account plus.

The variable rate of interest used to determine the value of the monthly prize fund is 1.75 per cent, with the top prize structure also changing.

The variable interest rate on the 30-day notice deposit account plus will now pay a variable rate of 0.50 per cent annual equivalent rate, down from 1 per cent.