Interest rates available to savers with An Post have been sharply reduced, with cuts in demand deposit rates and the rates available on new longer-term savings products.

Also, one popular deposit account product, which offered a higher return for those who were willing to give 30 days’ notice before withdrawing their cash, will no longer be available. The move further cuts the options for savers at a time of rock-bottom returns across the market.

The National Treasury Management Agency (NTMA), which sets the An Post savings rates, announced yesterday that it was reducing the interest rate on the normal demand deposit account from 0.25 per cent to 0.15 per cent. However, it is also abolishing the popular deposit account plus product, which had offered savers a 0.5 per cent return, on the basis that they gave 30 days’ notice when they wanted to withdraw cash. The same 0.15 per cent rate will in future apply to funds already lodged in these deposit plus accounts, and the notice period will no longer apply, effectively turning them into normal demand deposit accounts.

The move reflects the continued fall in international interest rates and the drop in the cost to the NTMA of raising funds for the State on the market. The last time An Post rates were changed was in October 2014. With funds available so cheaply on world markets, the State has less need to attract the funds of small savers.

An Post has also sharply reduced the return available on new longer-term fixed interest rate savings products, a popular way for savers to get a higher return by committing to lock away their money in savings bonds or savings certificates for a period of years. While savers with their money already in one of these fixed-rate products will continue to get the same return until the end of their term, for new savers rates will fall sharply. The new rates will apply from today.

The new issue of the three-year savings bond will offer an annual return (measured by annual equivalent return, or AER) of 0.33 per cent, down from 0.83 per cent previously.

The AER on a new four-year solidarity bond will fall to 0.5 per cent, compared to 0.99 per cent in the previous issue. The return on five and six-year products will now be an AER of 0.98 per cent, compared to 1.24 per cent previously. And the next issue of the 10-year solidarity bond will offer an AER of 1.5 per cent, down sharply from 2.26 per cent previously, in line with the drop in the cost of raising long-term funds on international markets.

The solidarity bond was launched in 2010 at the height of the financial crisis as a way for savers to contribute funds, at a time when the State was locked out of world markets. It attracted hundreds of millions in deposits, but will now be less attractive to savers.

The variable rate used to calculate the monthly prize fund on prize bonds will also fall, dropping to 0.85 per cent from 1.25 per cent previously.

Banks have complained that the returns available from An Post made it more difficult for them to attract savings.