Concerns over levels of personal savings despite 2017 increase
The rise in savings occurred despite the country’s record low interest rates.
The interest rates here are among the worst in the Eurozone.
The savings rate increased to 8.6% last year, up from 6.8% in 2016.
In cash terms, the deposits topped €8,846m. The amount deposited in 2016 was over €6,639m.
Jim Power, chief economist at Friends First, believes that low interest rates coupled with high DIRT taxes deter many people from saving.
In Ireland, the interest rate is 0.01%.
Mr Power said he would like to see DIRT reduced or even eliminated.
“You punish people for saving, that’s the reality,” he said.
A reported 53% of Irish consumers were putting money into savings accounts in December 2017.
However, by March of this year, the figure had dropped to 46%. The latest figure marked the lowest level of regular savers since July last year.
Deposit interest rates have been declining for a number of years across the eurozone, making saving even more unattractive.
According to the Department of Finance, consumer confidence is improving and there has been a modest rise in inflation, yet the growth in personal consumer spending was quite small last year.
However, there are fears that savings might drop off this year.
The latest Bank of Ireland/ESRI Savings and Investments Index decreased last month to 98 points, the lowest figure for the index since October 2017.
A Bank of Ireland/ESRI poll found that the current savings environment in Ireland had also led to increased negativity towards savings, driven more by the over-50s age group.
Mr Power said that the cost of housing could also deter people from saving.
“Housing is eating up more and more disposable income. Rent and mortgages are rising. Basically, many people in the personal sector just have less money to save because of the cost of living,” he said.
“I think the reason why the savings rate is starting to slip now is that people’s personal disposable incomes are under pressure.”
Although there has been a drop-off in the number of regular savers, there are many people who feel that they should be saving.
A Bank of Ireland/ESRI poll in February found consumers wanted to save more and spend less. A total of 41% said they wanted to save more money in 2018.
