NTMA wants cut in 40m An Post bill for bonds and savings certs services

THE National Treasury Management Agency (NTMA) is seeking a 20pc cut in its 40m-a-year payments to An Post for handling savings certificates, bonds and regular deposits.

The NTMA is responsible for managing the funds raised through these products on behalf of the Government, but An Post markets them and sells them in post offices. It charges its fellow State agency 2.75pc of the value of the transactions.

This is more than the certificates and bonds pay in interest to savers, and many times the 0.1pc which ordinary depositors in An Post savings receive. It also compares with the 0.5pc charged by the international managers of the national pension fund.

NTMA officials believe the fees are too high and are seeking an 8m reduction. A spokesman for An Post would say only that the matter was under discussion. An Post is likely to argue that there is considerable work involved in handling retail products such as these, where amounts are often small, and that the charges are justified.

With annual losses of 40m and facing increased competition, An Post could ill afford a reduction in income on this scale. But the Government will have to be careful how it handles the issue, for fear of breaching EU state aid rules. An Post has already had to compete for the contract to pay social welfare through the post offices.

An Post savings products are big business, and have become proportionately bigger as government debt has shrunk. Certificates and bonds on issue total 3.5bn, with a further 900m in prize bonds and national savings.

This represents a hefty 11pc of total government debt and An Post took in a net (after withdrawals) 350m last year.

They also represent good value for the Exchequer.

Their interest rates are significantly lower than the 3.8pc average paid on the national debt last year.

Most government debt is in the form of bonds sold to financial institutions and ten-year bonds currently yield 3.5pc.

Brendan Keenan