SSIA contributions falling slightly

INVESTORS availing of the Government's Special Savings Incentive Accounts (SSIAs) are reducing their contributions, new figures show.

As stormy economic conditions force consumers to tighten their belts, Department of Finance figures show subscriptions to the scheme for September dropped from €178.6m to €176.8m.

The figures suggest that, despite question marks over the future of the scheme, a widely anticipated rush of savers to increase their contributions has not materialised.

The State will add one euro to every four euros saved in an SSIA, provided the fund is maintained for five years.

Doubt over the scheme's future were raised by senior Cabinet members in September after a confidential memo was inadvertently leaked to the media which revealed that €900m in cutbacks were being planned. These have been blamed in part on the cost of the savings scheme, estimated at around €500m every year, or a total of €2.5bn over five years.

There has been increasing political disquiet over the impact of the Special Savings Incentive Accounts (SSIAs) on the public finances.

Fine Gael last week called on Finance Minister Charlie McCreevy to axe the financial penalty that consumers incur if they withdraw all their savings before the five-year period is up.

Party leader Enda Kenny said a withdrawal of this penalty or a cap on contributions could reduce the burden on the Exchequer.

Savers are free to increase their monthly contributions to a ceiling of €254 a month at any time.

However, Mr McCreevy has ruled out any changes to the scheme and says it has proved a great success, with around 40% of the adult population choosing to invest in it.

Observers say it is highly unlikely there will be any major changes to the scheme, as it would prove politically damaging.

Savers will able to withdraw their total savings in five years time, when the next general election is due.

Attempts to change the scheme could also pose some legal problems, as customers and financial institutions have effectively entered into a contract in creating each SSIA.

It also emerged yesterday that some banks have been refusing to allow customers top-up their contributions to their SSIAs, despite guidelines which say they should be able to so do.

Bank of Ireland and permanent tsb have told account holders they have to wait a year before increasing contributions.

However, Revenue Commissioners guidelines state customers may increase the amount in their accounts at any time. Both banks have since taken steps to amend their advice to customers.