Majority of SSIA holders will reinvest money or pay off debts, survey finds

THERE will be no spending spree when the Special Savings Incentive Account (SSIA) scheme comes to an end, according to a new survey by investment managers Eagle Star.

The life and pensions company said 70% of SSIA holders surveyed would use their lump sum to reinvest or pay off existing debts instead of splashing out on cars, exotic holidays or luxury goods.

Sales and marketing director Dermot Browne said the survey showed the SSIA had succeeded in creating a culture of saving among Irish consumers. “One of the objectives of the SSIA scheme was to re-establish a culture of saving,” he said. “From the findings of our survey, this objective looks set to be achieved. It also looks like a majority plan to re-invest at least part of the lump sum accumulated.”

Almost two in five respondents said they would put their SSIA lump sums into a savings policy with a financial institution. 19% will switch at least part of their windfalls into a pension, while 17% were in favour of investing the money in property. The same number planned to use the money to fund home improvements, but just 8% will splash out on a holiday.

Eagle Star found 51% of respondents would continue saving after the SSIA scheme came to an end between April next year and 2007. 23% of people will put their monthly savings into a pension plan, but only 15% will use the extra disposable income that they will have when they are no longer paying into an SSIA to ramp up day-to-day spending.

Eagle Star pensions director Brendan Johnston said the government should use the end of the SSIA scheme as an opportunity to encourage people to take out a personal pension. “There need to be incentives that will capture the imagination of the public in the way SSIAs did,” he said. These included tax credits in return for transferring the lump sum into a pension plan and the ability to access part of the funds saved before retirement, if desired.

But high-level briefing papers prepared before last year’s Budget showed senior civil servants opposed to tax incentives to increase pension take-up.