Amount paid out in prize bonds to be reduced

The amount paid out in prize bonds is to be reduced. The headline monthly €1 million prize bond draw will continue, but there will be less money available for the €1,000, €100 and €50 prizes.

The National Treasury Management Agency has announced the total amount of prize money paid out annually will be 2.25 per cent of the total prize bonds pot, compared to the 3 per cent operating until this week.

The changes are part of a policy by the NTMA to pay out less to Irish citizens who lend to the State.

Prize bonds, savings bonds and national solidarity bonds are among the products where there will be a reduction on the interest rate paid of between 0.35 per cent and 0.95 per cent on the annual equivalent rate (AER) of interest.

There is currently approximately €1.5 billion in prize bonds, making for an annual pot of about €45 million. The equivalent figure with a prize fund based on 2.25 per cent of the total money available is €34 million, a reduction of €11 million.

Prize bonds have been thriving despite the recession as savers have looked to them for a higher rate of return than would be available at a bank or a building society. The amount available has more than doubled since 2007.

An NTMA source said the decrease had to be looked at in the context of borrowing costs for Ireland in general which have fallen dramatically in the last year.

He said a return of 3 per cent was high when considering that the State’s ordinary deposit account paid only 0.25 per cent and deposit account plus accounts paid 1 per cent annually.