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INVESTMENT

Government Savings Scheme

Nov 1, 2006: Financial Regulator says it is monitoring SSIA process

Jul 24, 2006: Irish Pensions Board urges SSIA holders to invest in pensions

March 30, 2006: Financial Regulator warns consumers on making investment decisions about SSIA money

Feb 1, 2005:Bank of Ireland says SSIA holders not planning "spending spree"
Bank of Ireland says that its research explodes SSIA "spending spree" myth - up to 83% to save some or all monies

Closing Date April 30 2002

The Minister for Finance introduced a new savings scheme in the Finance Act 2001. Its principal objective is to encourage regular savings by individuals. The main features of the scheme are as follows:

For every amount saved in the scheme, the Exchequer will contribute to the individual saver’s account an additional 25% of that amount. This is equivalent to giving tax relief on savings at the standard rate of income tax.

Income or gains from the savings investment are taxed at 23% and this will be deducted by the participating financial institutions at the end of the five years.

The scheme commenced on 1 May 2001 and accounts must be opened before 30 April 2002 to benefit. The Exchequer contribution will apply for a five year period only.

Every individual, who is resident in the State and 18 years of age or over, can save in one of these accounts. This is so whether an individual is married/unmarried, employed/unemployed, or working outside the home/working in the home. Each individual will be allowed only one account and on opening the account will be required to supply his or her PPSN (personal public service number) to the financial institution concerned.

The maximum amount that an individual can lodge to an account in any one month will be €254(200), and the Exchequer’s contribution to the account will be €63.50 for each €254 lodged. The minimum amount which must be saved by an individual in any one month, in the first year of an account, will be €12.70(10), though an individual may save up to €254(200) maximum in any month. After the first year an individual may save any amount in a month up to €254(200) over the remaining 4 year period.

Special saving incentive accounts will be managed, on behalf of an individual saver, by a range of bodies such as banks, building societies, credit unions, life assurance companies and fund managers. Exchequer contributions to each account will be sent directly to the account manager and added to the savings in the account. The Government will not be operating or guaranteeing the account or the return under them - this will be a matter between an individual and an account manager. It will be a matter for each individual to assess any level of risk they wish to undertake.

It will be possible for an individual to transfer a special saving incentive account from one investment manager to another during the five years.

An account can comprise investments in deposits, quoted shares, government securities, collective funds or life assurance products, as determined by the account manager.

To obtain the maximum benefit from the savings in the scheme, the savings must be left for the full term which is five years. Where that is the case, tax at 23% will apply only to the difference between the total value of the assets at that point in the account less the amounts invested together with the Exchequer contribution. That means that only the income or gains generated by the investment of all moneys lodged in the account will be liable to tax. This will be deducted at the end of the five year period whether the funds are withdrawn from savings or not at that point.

However, if there is an earlier withdrawal from an account (other than on death), the full amount withdrawn (both the savings and investment return) will suffer tax at 23%.

An account cannot be used as security for a loan.

The following sets out some examples of possible benefits. It should be noted that returns are just an assumption for the example; it will be a matter between the financial institution what return or gain is involved.

Example 1:

Joe opens an account with his preferred account manager and decides to save €50 a month for the five year period. Joe will save €3000 over the five year period and the Exchequer will contribute a further €750. If the return on investment is assumed to be 4% per annum the return on this €3,750 saved over a period would be of the order of €390 which would be taxed at 23% leaving a net gain of €300. Thus Joe would have €4,050 at the end of the five year period for €3,000 saved, a gain of €1,050 after tax.

Example 2:

Anne decides to open an account and save the maximum of €200 per month. She will save €12,000 over the five year period and the Exchequer will contribute €3000. Again assuming a 4% return the gain on this €15,000 would be €1,564 which would be taxed at 23% leaving a net gain of €1,204. Thus Anne would have €16,204 at the end of the five year period, a gain of €4,204 after tax.

The European Central Bank( ECB) interest rate is now 3.25%( fixed on November 9 2001)

SSIA Fixed Deposit Accounts

   
ACC Bank 4.5%
Anglo Irish Bank 4.25%
First Active 4.25%
Irish Nationwide 4.00%
EBS 4.25%
Ulster Bank 4.15%
An Post 4.00%
TSB 4.25%
AIB 4.00%
Bank of Ireland 4.00%
Irish Permanent 4.25%
The Consumers Association of Ireland has said that savers should only sign up for SSIAs that guarantee that interest will never be more than 1% below the base rate set by the European Central Bank (ECB). The current ECB rate is 3.25% rate.

Summary Terms of Selection of SSIA Products

Company Product Name Number of options Management charge Minimum premium per month Policy fee Entry fee per contribution
Hibernian Life Spectrum Special Saver 20 2% pa €12.7 €1.50 month Nil
New Ireland SSIA 4 1.65% pa €76 Nil 200,4% < 200, 5%
Quinn Life   2 1% pa €50 Nil Nil
Friends First SaverFirst 6 1.35%pa €95 €2.64 month Nil
Eagle Star A.Matrix Secure Savings 11 1.5% pa €60 Nil 5%
  B.Secure Savings 1 1% pa €60 Nil Nil
Irish Life SaverScope 5 1.65% pa €125 Nil 5%
Bank of Ireland Fixed Deposit 1 None €12.7 Nil Nil
  Flexible Deposit 1 None €12.7 Nil Nil
  SSIA PIP 1 1.6% pa €60 Nil 2.75%
AIB A. PIP SSIA 1 1.5% pa €75 Nil 3%
  B.Fixed Deposit 1 None €63.5 Nil Nil
  C.Variable Deposit 1 None €12.7 Nil Nil
Ulster Bank A.Stockmarket and 50/50 funds 2 1.9% p.a. €60 Nil Nil
  B.Variable Deposit 1 None €12.5 Nil Nil
  C.Fixed Deposit 1 None €12.5 Nil Nil

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