The 400,000 Special Savings Incentive Account holders are facing much lower returns as financial institutions cut deposit interest rates to reflect lower European Central Bank (ECB) rates.

Banks and building societies reduced mortgage interest rates in the weeks immediately after the ECB cut its key interest rate by 0.5 of a percentage point from 3.25 per cent to 2.75 per cent. Many advertised lower deposit rates over the Christmas and New Year's holiday with Bank of Ireland expected to cut its rates later this week.

It is estimated that SSIA holders who opted for the variable deposit rate could lose up to €1,000 from their final savings following the ECB rate cut. Becketts Employee Benefits Consultants has indicated that each 0.5 of a percentage point cut in the variable rate for an individual contributing the maximum €254 a month could result in their final balance at the end of five years being €1,000 lower.

Bank of Ireland is currently offering a rate of 4 per cent with the minimum possible rate payable to SSIA holders over the five years guaranteed at 1.75 per cent.

First Active and Permanent TSB announced the largest reduction in the variable rate on SSIAs reducing these rates by one percentage point, double the ECB rate cut.

First Active cut its variable deposit rate on SSIAs from 3.75 per cent to 2.75 per cent. This rate was effective from December 16th, 2002 and is the lowest possible rate it had offered to customers. Permanent TSB, which had been offering a variable rate of 4 per cent is now providing a return of 3 per cent. Its lowest possible rate is 1.75 per cent.

The highest rate of return for SSIA deposit account holders among those which have cut rates is from Anglo Irish Bank. It has opted to cut its SSIA variable deposit rate by 0.25 of a percentage point from 4 per cent to 3.75 per cent. The bank offered customers a fixed rate of 4.25 per cent for five years on these accounts.

AIB's rate reduced from 3.25 per cent to 2.75 per cent. The EBS building society has cut its rate by 0.75 of a percentage point to 3 per cent.

ACC Bank has also brought its SSIA deposit rate to its lowest possible level of 2.75 per cent from 3.25 per cent.

Ulster Bank's variable rate reduced by 0.5 of a percentage point to 3.25 per cent and remains above its minimum 2.5 per cent guarantee to account holders. The bank had offered a range of fixed rates with some of its customers locked into a rate of 4.25 per cent for five years.

Northern Rock's rate fell from the beginning of January moving from 3.5 per cent to 3 per cent. It had undertaken to pay customers the ECB rate plus 0.25 of a percentage point until January 2003 and 2.75 per cent thereafter and has so far maintained its rates above this minimum requirement.

National Irish Bank cut its deposit rates in December at the same time as mortgage rates were reduced.

Its variable deposit rate on the SSIA account was cut by 0.75 of a percentage point to 3.25 per cent holding it above its minimum possible rate of 2.5 per cent.