THE first point to be made about the National Solidarity Bond is it is not another SSIA scheme to which the Government will contribute.
It is clear the level of interest paid will be the key reward for investors, with a back-up bonus for those who keep their investment running for the full term, which can be over a five, seven or 10-year term.
With interest rates likely to rise from their current historic lows the Government will have to put an offering on the table that will deal with that basic issue, said David Fennell, tax director at Ernst & Young.
Critical to its success will be keeping people committed to the savings terms, he said. In that sense having the bond “back-ended” with attractive bonuses will be critical. Those who pull out before the end of the agreed term could have their savings taxed, he said.
The President of the Society of Chartered Surveyors Ken Cribbin said: “The announcement to introduce a National Solidarity Bond is welcomed as a vehicle to encourage investment in infrastructure, however, further detail is required.”
Construction Industry Federation chief Tom Parlon stated: “The CIF looks forward to discussing the details of the bond as an addition to the public capital programme with the minister.”
How it will work remains to be seen. Interest rates on savings and deposit accounts may be either fixed or variable, but if the Government wants this product to succeed it will have to make it attractive to entice a cash-strapped nation.
Full details will be made known though the National Treasury Management Agency in early January and the details will be contained in the Finance Bill due by the end of the month or in early February.
The National Solidarity Bond will finance the capital investment programme underlying the budget and will not be used to fund additional spending, Finance Minister Brian Lenihan said.
“A product of this kind would enable ordinary citizens to provide money to the State to stimulate economic recovery and create employment,” he said.
The bond will be aimed at small investors and will be in addition to the current range of State savings products such as savings bonds, prize bonds, national instalment savings and the Post Office deposit account.
The bond will be sold by An Post on behalf of the National Treasury Management Agency.
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