Next Monday is payday for 140,000 First Active shareholders, who will share a payout of €887 million following the company's sale to the Royal Bank of Scotland Group.

On January 19th, shareholders who have mandated First Active to credit the money for their shares straight into a First Active account will receive their payments. Cheques will be posted on Monday to the remaining shareholders.

The First Active shareholders will receive €3,069-€6,138 each for their shares. A typical investor who owned less than 1,000 shares will receive about €4,000.

The shares are liable for capital gains tax at a rate of 20 per cent. Some shareholders will have no liability if their gains are calculated as being lower than the annual capital gains tax exemption of €1,270.

So the Revenue Commissioners may eat into a small portion of the gains, while household expense could swallow up large chunks.

"Certainly there is a strong case for paying off short-term debt," says Mr Brendan O'Hora, head of marketing at First Active.

The First Active shareholders have an average age of 50, he says, meaning any long-term debt outstanding on their mortgage is likely to be substantially reduced. With interest rates on home loans so low at the moment, some shareholders may prefer to leave their mortgage as it is, according to Mr O'Hora. Other than paying off debt or celebrating by spending the rest, what should shareholders do with their windfall?

First Active notice account

To stop a sudden exodus of money from the new company, First Active has launched a 10-day notice account designed as a resting home for the windfalls paid to shareholders.

Accountholders must give First Active 10 days' notice before they can make any withdrawal, however, they will have access to their funds on demand until January 31st.

"The vast majority of our retail shareholders have been loyal to First Active for the last five years and the special 10-day notice account with very competitive rates reflects this," says Mr O'Hora.

The closing date for the account has been extended from January 31st until February 27th.

So how competitive is the First Active account? It boasts an interest rate of 2.5 per cent gross. However, this includes a 0.5 per cent "bonus" that is payable only until March 31st.

The account has a price promise that its rate will at least match the European Central Bank (ECB) rate - currently 2 per cent - until the end of 2004.

At the moment, Anglo Irish Bank is the only financial institution bettering the ECB rate on relatively low sums in a short notice account.

The rate on its seven-day notice account is 2.3 per cent on balances of €2,000 or more. Anglo Irish's main competitor for high interest deposit accounts is Northern Rock, which offers a rate of 1.85 per cent on demand and 2.15 per cent on a one-month notice account for balances of €1,000 or more.

The ECB is forecast to raise its rate by a quarter of a percentage point later in the year.

Former First Active shareholders and anyone else who wants a reasonable, inflation-beating return on their money without risking a flutter on the stock market will be keeping a close watch on which financial institutions pass on any increase to their deposit customers and which ones don't.

Other First Active options

In further attempts to keep shareholders' custom, First Active is giving preferential terms to former shareholders on two investment funds.

They will receive a 1 per cent bonus on top of any investment in the bank's cautious, balanced and specialist investment funds.

The minimum investment amount for the funds is €5,000. According to Mr O'Hora, investors whose payout falls short of this amount will take money from other places to make up the difference. The bank has also launched two new shareholder versions of its tracker bonds, the Select 50 and Combination Bonds, which both have a minimum investment of €2,000.

The Shareholder Select 50 bond has a term of three years, half that of the normal version.

The upside potential is more favourable than on the previous six-year edition of the bond. However, unlike the last issue of Select 50 there is no minimum return.

The Shareholder Combination bond pays 14 per cent on a one-year deposit, in which a quarter of the money is put.

The other 75 per cent is placed in a five-and-a-half year tracker bond that invests in 50 companies.

Like a lot of the tracker bonds on the market, the maximum gross return on this product may seem generous enough at 55 per cent, but is actually difficult to achieve because of the way in which the gain on each individual share is capped.

SSIA top-ups

Many holders of deposit Special Savings Incentive Accounts (SSIAs) will have forgotten all about them, assuming that their direct debit into the Government savings scheme is still functioning properly.

Holders of equity SSIAs, alarmed by media reports of falling investment markets over the first year or two, may have examined their statements a little more closely since signing up. Most equity SSIAs are now breaking even, while markets continue to improve.

Unlike other deposits, the attraction of a deposit SSIA is not the paltry interest rate offered by the financial institution, but the guarantee of a Government contribution of €1 for every €4.

Former First Active shareholders who hold either type of SSIA but are not contributing the maximum monthly sum permitted could do worse than to drip-feed their windfall into an SSIA over the remaining months.

More carpet-bagging

New legislation has been written to allow for the demutualisation of Irish Nationwide and is due to be passed by the Government in 2004.

This could eventually lead to windfall payments for members of the building society.

It also means that it is probably far too late for ex-shareholders of First Active who are not already members of Irish Nationwide to repeat their carpet-bagging success.

Accounts must be open for two years prior to a resolution to convert from a mutual society to be eligible for any windfall.

To qualify as a member, savers must hold a share account rather than an ordinary deposit account.

In the past it was possible to open a share account with voting rights for £100 (€127). However, the minimum amount required to open a share account has gradually increased.

The current minimum is €20,000, meaning ex-shareholders of First Active would have to add significantly to their first windfall in order to even be in with a chance of securing a second.

Laura Slattery