An Irish Times guide to the world of personal finance. This week, SSIA's, Bonds, Equities and Pensions.

SSIAs

I have been funding by direct debit an SSIA account that my son opened in a building society six months ago. He has now taken a job in the UK. If the job there works out, he may stay permanently but more likely will return here in about six months. Can I continue to fund his SSIA account for: (a) six months? (b) permanently?

Mr B.P., e-mail

The rules about funding special savings incentive accounts for your children are quite clear. Most importantly, there must be a clear understanding that the money you are paying into the SSIA is a gift - that is, that you have no expectation of having the money repaid either at the end of the savings term or later.

Thereafter the general SSIA rules apply. That means that you cannot gift SSIA contributions to a child unless that child qualifies by age to open an SSIA - i.e. that they are 18 years or older. Equally, the residency rules apply. If your son returns in six months, there is no reason that you cannot continue to irrevocably gift him money by way of contributions to an SSIA in his own name.

However, if his move is permanent, he will fall outside the residency requirements of the SSIA scheme before the maturity of the account. In that case, the account would be closed and he would face exit tax, currently 23 per cent, on everything in the account - the initial capital investment, the Government bonus and any interest or return accruing. Remember also that the tax liability would be his, as the account is in his name and you will have gifted him the money permanently.

If there are insufficient funds in my bank account to meet the direct debit payment into my SSIA, what are the consequences? Will the money be taken out anyway? Or will the bank wait till there are sufficient funds there to meet that monthly direct debit?

Mr K.O'R., e-mail

The consequences could be grave. Your bank has no obligation to meet a demand for payment by direct debit or otherwise where the funds are not cleared and in the account to meet it. The practice varies from institution to institution and will, in part, depend on your credit record and whether you have an overdraft facility in place. If the bank refuses to pay because of lack of funds, it will not simply wait until funds are available and then pay. What will happen is that it will return the demand unpaid and, unless that demand is submitted a second time at a time when funds are available, it will not be paid.

For your special savings incentive account, the failure of a payment to go through could jeopardise your savings plan, especially if it happened in the first year of the account. In the first 12 months, you have to make one payment of between €12.70 and €254 each month without exception. Some institutions and products set higher thresholds for monthly payments. Failure to do so will signal the closure of the account, with the application of the exit tax referred to in the previous answer. After the first year, you can stop paying into the account and start again later without penalty under scheme rules, although again institutions may vary in their tolerance of payment holidays.

Nonetheless, if your direct debit fails, it is unlikely the SSIA provider will go to the hassle of continuing to seek payment on foot of the arrangement. You may have to change the method of payment. All in all, the best advice is to ensure there are enough funds in your account to meet any direct-debit arrangement for your SSIA. Indeed, the same advice holds true in general. It is much harder to build a good credit rating than to lose one, and the repercussions can be far-reaching.

Bonds

Could you give all the necessary particulars for readers interested in the bond auctions the Government intends to conduct on a regular basis?

Mr S.G., Dublin

The auctions to which you refer are not open to private investors. People looking to invest in gilts - Government bonds so-called because of their perceived security due to State backing - can do so through various funds that offer access to gilts to varying degrees.

Equities

In general terms, are Irish residents/taxpayers entitled to buy stocks and shares in funds or companies outside of the State?

Mr G.B., e-mail

In general terms, yes.

Pensions

I was hoping you might be able to clarify the up-and-coming Pensions Bill for me. I am with my current employer for four years and intend changing jobs over the coming months. My one concern is that I will end up losing my pension entitlements - the pension being a non-contributory defined-contribution scheme. Have I understood the new Bill correctly - i.e. come June of this year, will I automatically be allowed retain my pension and possibly move it to one of these new pension vehicles?

Mr A.J.R., e-mail

At present, companies operating occupational pension schemes do not have to grant pension rights to individuals working less than five years with the company. After five years have been served, employees are entitled to membership of the scheme backdated to the time they joined the company. Of course, this is the maximum allowed under the current law and some firms do grant employees pension rights earlier.

Under the provisions of the Pensions Bill currently before the Oireachtas, this vesting period will be reduced to two years. After months of doubt, it does appear now that the Bill will complete its passage through the Oireachtas ahead of the general election.

However, this is not guaranteed and should it fail to do so, the existing rules would continue to apply pending the revival of this or other legislation in a new Oireachtas.

In terms of what you will be allowed to do with any retained pension benefits with a company for which you no longer work, this will be laid down in the Bill, but is currently subject to regular change by amendment. It appears the industry is lobbying hard to restrict your scope in controlling the fate of your pension fund.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.