Fianna Fáil Spokesperson on Finance Michael McGrath says savers have been left short changed following a 60% fall in the amount of money paid out under prize bonds. Deputy McGrath made the comments after receiving information from Minister for Finance Michael Noonan which shows that there is now a record €2.68bn in Prize Bond savings while the amount of prizes paid out fell to €28.9m last year.
Deputy McGrath said, “The continuing popularity of prize bonds can be seen from the fact that the total amount in the prize bond fund has increased by 86 per cent since the end of 2011. Clearly the public are attracted by the tax free nature of prizes paid at a time when DIRT tax rates have been massively increased.
“However it’s important to remember that prize bonds do not pay interest and the real value of holdings is reduced by inflation over time. Many savers will feel short changed by the massive reduction in prizes being paid out.
“I accept that it was inevitable there was going to be some reduction in the proportion of the prize bond fund paid as these are effectively a proxy for interest on the money invested in the scheme. However Prize Bond savers will be shocked to learn that the amount of prizes paid as a proportion of the year end value of the fund has fallen from 2.9% in 2011 to just 1.16% in 2015.
“Prize bond holders are in for a further hit after the recent announcement that from next month the top prize of €1 million will now only be won 4 times a year whereas it was previously paid on six occasions. The number of smaller prizes ranging from €50 to €1,000 is also being reduced.
“Given the reduction in the level of pay out, prize bond savers need to carefully consider if their money is getting the best return for them. Some people will obviously like the chance of winning a big prize in the draw and will be happy to hold on to their investment. However others may need a real return on their savings and now is an opportune time for them to possibly consider other options such as the 10 year State Solidarity bond offered by the NTMA.
“The prize bond issue highlights once again the very poor environment for savers in Ireland, made worse by massive increases in DIRT tax rates. This is an issue which will need to be addressed in future budgets,” concluded Deputy McGrath.