Premature closure of 80,000 SSIAs saves the State over €200m

ALMOST 80,000 SSIAs were prematurely closed because the holders could no longer afford contributions, wished to end their participation or breached scheme rules.

Analysis of Revenue figures suggests their withdrawal may have saved the State more than €200 million.

More than 1.17 million SSIAs were commenced between the opening date of May 1, 2001, and the closing date of April 30, 2002.

For every €4 invested by an account holder, the State added €1 — provided the person saved for the full five-year term of the scheme.

However, 86,519 accounts were closed before they matured. In 7,849 of these cases, the accounts ceased because the holders died, and the State paid all contributions due in these instances.

However, the remaining 78,720 were ceased voluntarily or because, in “a small number of cases”, the rules were breached, according to Finance Minister Brian Cowen.

This meant the State did not have to pay out to the 78,270 account holders involved.

Given that the State expects to pay an average of €2,768 to those who stayed in the scheme for the full five years, it could have saved as much as €217m from the 78,270 accounts which ceased prematurely.

However, a Revenue spokeswoman said it would be impossible to determine an exact figure.

“As regards cases ceasing voluntarily or ceasing due to breaches of the rules, these occurred at various times over the five-year period and with varying amounts of contributions, so it really is impossible to hazard a guess at how much was saved,” she stated.

There is also little hard data to explain exactly why people chose to close their accounts prematurely. Financial institutions have assessed how people intend spending their SSIAs once they have matured, but there is a dearth of research as to why individuals would have closed them early.

However, the Money Advice and Budgeting Service, the independent organisation which helps people in or at risk of debt, said inability to maintain contributions was “certainly a factor” for some of those closing SSIAs.

There is also anecdotal evidence to suggest some persons cashed in SSIAs to help purchase homes.

Meanwhile, of the SSIAs left for the full five-year term, 396,618 have already matured.

The remaining 687,021 will mature between now and April, when the scheme ends, according to the information supplied by Mr Cowen to Fine Gael TD David Stanton.

The State expects to pay out a total of €3 billion to the 1,083,639 account holders involved, based on the fact the holders have invested roughly €12 billion themselves.

This means the average State payout for each SSIA will come to €2,768.