Call for SSIA to be altered
AIB economist Oliver Mangan wants Finance Minister Charlie McCreevy to urgently change the scheme because it’s crippling the state’s finances, he says.
The saving scheme that pays €1 for every €4 saved is costing €550m a year despite a projected annual cost of only €120m.
“The Government has to look at ways to reduce the cost of the scheme. The 25% top-up is very high and they could cut that back to 10% or 12.5%,” he said.
“When this scheme was drawn up there was a very large budget surplus and the exchequer was awash with cash. Essentially the Minister has to borrow the money now to fund this.”
One way of reducing the SSIA costs would be to allow savers to withdraw from the scheme without losing the credits the state paid to their account, Mr Mangan said.
At the moment people lose the interest paid by the Government if they leave the scheme early.
Mr Mangan also wants the Finance Minster to cut the €254 maximum monthly payment to €100.
“If this was done low income savers wouldn’t be hit but people on higher incomes who are saving a lot under this scheme could have their contributions capped,” Mr Mangan said.
Investment in priority projects such as the move to improve primary school buildings could go ahead if the scheme was scrapped, the AIB economist said.
However, opinion is divided among finance experts on the issue.
Irish Intercontinental Bank (IIB) economist Austin Hughes, defended the savings initiative yesterday.
“We’re still in a fairly healthy position. We’re not in an economic crisis. The money is there for this and for the other very necessary spending that has to be undertaken.”
The Taoiseach has denied that the Government plans to cut back on the scheme.
“We had this last year, the same argument, and the story ran for four months. The minister has no intention of capping or changing or restructuring it,” he said.
