Conference told SSIA bonus should be cut 50%

THE Government should cut the 25% Special Savings Incentive Account bonus to 12.5% or 10%, the Dublin Economic Workshop Conference was told.

Oliver Mangan, of AIB Global Treasury said that SSIA investors should also be allowed to remove themselves from the five-year scheme at any time without losing the bonus payments that had accrued.

The scheme is costing the exchequer 540 million per annum compared to initial projections of just 100 million euro.

He also went on to point out the indirect cost of the scheme to the exchequer.

It had depressed economic activity, particularly consumer spending, with the resultant knock-on effect on tax revenue.

“Clearly, the Government’s 25% bonus payment is seen as remarkably generous,” said Mr Mangan.

Funding the National Pension Reserve Fund was also criticised. Up to the present point in time, the exchequer contribution to the fund came from once-off payments and budget surpluses.

“However, as the public finances move into deficit the Government will effectively have to borrow money to pay the exchequer’s 1% of GNP contribution to the fund.

This can hardly be classified as saving for retirement given that an offsetting debt is created,” he said.

Mr Mangan said instead of borrowing the money the Government should seek to transfer State resources equivalent to 1% of GNP to the pension fund each year.

“Privatisation receipts obviously come to mind in this regard but are unlikely to be that large.

“The central bank, though, has around 6 billion in foreign currency reserves, equivalent to almost six years of contributions to the National Pension Reserve Fund.”

Because of the euro, this currency reserve was no longer needed.