Bank of Ireland pension funds to be charged for first time

Updated 17:02

People who have money in pension funds with Bank of Ireland will soon be charged to do so for the first time.

From September, the bank is to begin applying negative interest rates on cash held in pensions.

Bank of Ireland will apply an interest rate of 0.65 per cent on pension pots, meaning that customers will be charged €65 a year for every €10,000.

It essentially means that banks, for the first time, are now charging customers to hold money in their accounts. The move has raised concerns that other institutions could follow suit.

Minister for Finance Paschal Donohoe distanced the Government from the move: “It is a commercial decision that has been made by banks, and those decisions are always made independently of any government.”

In a statement, Bank of Ireland said it is not charging personal customers directly but pension funds. It highlighted that European Central Bank interest rates have been negative since 2014 and are likely to remain low “for some time”.

“As a result we have applied negative rates on deposits for large institutional and corporate customers since 2016. We recently wrote to 14 investment and pension trustee firms to inform them about a rate change to their accounts, which is reflective of the negative interest rate environment.

“The average amount held on deposit by investment and pension trustee firms is in excess of c.€100m, therefore it is no longer sustainable for the Bank to continue with the current rate of interest,” it said.

Other banks

Meanwhile, Ulster Bank said it couldn't rule out introducing negative rates on current accounts in the future.

Ulster Bank chief executive Jane Howard said it was not in their plans for now: “In terms of Ulster Bank, we did introduce negative rates early this year, and we’ve introduced it for the larger businesses with balances over a million euros.

“I’m able to sit here today with no plans to charge negative interest rates for our personal customers, but given the way everything happens likes Covid so unexpectedly, it’s not something I can rule out forever.”

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