The equity-versus-deposit debate has always been a lively one, with the arrival of Special Savings Incentive Accounts (SSIAs) in 2001 only serving to raise the stakes of the discussion

Three years on (and two years on from most of us actually getting around to opening an account), the arguments continue to rage on which option is best.

About 12 months ago, the crux of the issue was the low return that had so far been generated on the equity-based structures. Investors in these products were understandably worried that they had been sold a pup - that the benefit of the Government contribution to their hard-earned savings would be eliminated by their decision to take a chance on stocks and shares.

They wondered if it was a good time to cut their losses, and switch into the guaranteed returns offered by a deposit account for the rest of the five-year term.

One suspects that the debate has since turned full circle, as individuals holding deposit accounts, particularly those carrying unimpressive variable rates, look to the gains that have been notched up in equity-based SSIAs over the past year.

Perhaps we have now reached a point where switching into equities is the way to go.

The answer, of course, is that there is no right answer since nobody knows for sure where the equity markets are likely to go over the remainder of the savings scheme. And the same is true, to a lesser extent, of interest rates.

The consensus is that the European Central Bank will raise rates at some point over the next 18 months or so. However, the extent of the increase is likely to be limited, thus having little consequence for SSIA rates.

For the record, however, the best option with deposit accounts (see table) seems to be fixed rather than variable.

Back with equities, stock markets have so far this year been a touch more anaemic than they were in 2002, although few commentators would dispute the existence of a growing economic and market recovery across the world.

This is the reason for all the current debate on raising interest rates in the US and the euro zone, with low interest rates typically associated with a less healthy picture.

The ISEQ has held up fairly well in this context, gaining about 10 per cent in the year to date. This compares to about 2 per cent for the FTSE All Share Index and a bit less than that for the Eurostoxx 50 index.

The path to be taken by stocks for the rest of the year looks relatively favourable, as the markets continue to react to continued improvements in the reported results of listed companies. The US presidential election in November is also likely to offer a fillip to performance.

Friends First chief economist and strategist, Mr Jim Power, is hesitant, however, arguing that much of the good news that is currently floating around the markets has already been "priced in". In other words, he thinks stock prices may already have reacted fully to the positive drivers that exist in the wider economy.

In this light, he expects any upward momentum still to come to be volatile, particularly as bond yields and interest rates increase. Mr Power says that in general, US markets look to be better placed than their European counterparts.

This argument sits well with guidance offered by Hibernian Investment Managers (HIM - one of the fund managers featured in the above table) at the start of this year, when we were told to buy equities in the initial months of 2004 with a view to selling and locking in gains before summer. HIM was at that stage pencilling in gains of 15 per cent in equity markets for the year, with the bulk of these to occur in the first half. If this is correct, then perhaps the time for switching from equities into deposit is approaching.

Again, though, timing is always difficult to gauge, with the latest research from Davy Stockbrokers suggesting that the summer and early autumn could be good for equities, with the latter end of 2004 and the start of 2005 potentially more difficult.

What is certain, however, is that those who left it until the last minute to open their equity SSIAs are in a better position than those who opened earlier in the scheme.

This is because account-holders who were in from the start suffered more of the market downturn and thus had more ground to make up when recovery finally arrived.