Public invests € 4 billion in SSIA scheme
The figures were confirmed yesterday by the Department of Finance. The total bill to the Exchequer is set to hit the €2.65bn mark.
The majority of people, nine out of 10, with an SSIA are in the medium to low-income bracket, and they stand to make big gains when the scheme finishes in three years.
The SSIA scheme, which pays €1 for every €4 saved, is costing €550m a year despite a projected annual cost of only €120m.
The controversial scheme introduced by Finance Minister Charlie McCreevy in 2000 has divided opinion among financial experts, with some claiming the maximum monthly payment should be cut to €100.
Earlier this year AIB economist Oliver Mangan said the scheme should be changed because it is crippling the country’s finances.
However, a leading economist last night urged the Government not to alter the scheme despite the huge costs involved. Irish Intercontinental Bank (IIB) economist Austin Hughes defended the initiative.
“Perhaps the money could have been better spent, but it’s there now and any change would be bad for the credibility of financial policy. The upturn in the global economy and the improvement in the public finances means this shouldn’t pose a problem at payment time,” he said.
But Mr Hughes believes the Government should look at introducing a new scheme, when the SSIAs expire in 2006 and 2007.
“There will be a large amount of money coming into the economy and the Government should ensure some of it remains in savings, if they want to create a savings culture,” Mr Hughes said.
Mr Hughes said any new scheme will have to be less generous. “It should probably take the form of a tax incentive but it will have to be more modest,” he said.
People taking out SSIAs had the option of a fixed or a variable rate account.
To date those on the fixed rate have benefited more, with variable accounts linked to the stock exchange particularly hard hit.
If people withdraw from the scheme early they lose out on interest paid by the Government.
