An Irish Times guide to the world of personal finance.

SSIAs

I have gone to many banks and building societies and they all say that interest is based on the ECB rate. I have asked if the interest rate rises in Ireland - e.g. to 7 per cent - would the savers of the Government SSIAs get the rise, or are we all locked into what they are advertising - the ECB rate? Can you tell me about any bank or building society that would pay this rate?

Mr R.F., Dublin

The Republic is now part of the euro zone and, therefore, we no longer set our own interest rates. The interest rate is now set by the European Central Bank (ECB) so all institutions offering variable interest rate deposit accounts under the Special Saving Incentive Account scheme give a baseline guarantee against the ECB rate.

Thus, if the ECB was to raise interest rates to 7 per cent, those institutions guaranteeing to match the ECB rate over the course of the SSIA would be bound to raise the rate on their variable deposit accounts to the same level.

However, there is little prospect of interest rates rising to these relatively giddy levels. The ECB rate stands at 3.25 per cent and, while this is expected to rise in the months ahead, none of the pundits expect it to double.

At the time of writing, ACC Bank, First Active and Northern Rock all commit themselves to match the rate, but only ACC will match the rate regardless of the investment. First Active requires a minimum monthly deposit of €60, while Northern Rock will only match the ECB rate for those saving €254. Those saving less than this on a monthly basis will receive a less-favourable bottom-line guarantee.

For what it is worth, the best rate on variable deposit SSIAs at this time is on offer from the EBS Building Society, which is paying 4.5 per cent - well ahead of the ECB rate. However, EBS only guarantees to hold rates no more than 0.5 of a percentage point below the ECB rate. It could at any time cut its interest rate on SSIAs to 2.75 per cent. Of course, should it do so, there is nothing to stop the saver switching to a variable deposit account with another institution.

The banks and building society seem to be relying on inertia and the hassle involved in rerouting direct debits from one institution to another.

I am sure you have answered this question many times but I nonetheless need to confirm my situation and hope you can clarify it for me.

I opened my SSIA account last year without knowing I would be relocating to the UK. I have been working in the UK for one month and am paying tax here. Is it the case that I could remain in the UK for three years, paying no tax in Ireland, and that if I return within three years and resume paying tax in Ireland, all of my contributions and the interest would stand?

I was completely unaware of the fact that I would be hit for 23 per cent on everything if I closed the account (due to moving country). Had I known I would certainly not have been saving £200 per month, of money on which the Government has already charged me the top rate of tax.

I will close the account now and cut my losses if I should but if everything will be OK, assuming I return within three years, then I would consider leaving the account open and continuing my contributions. I realise that it was my mistake to not have found out about the 23 per cent penalty but I think it is grossly unfair, not least on those who are forced to stop contributing due to financial hardship.

I hope I haven't made a huge mistake. We all work too hard for that!

Ms C.A.M, London

You should be okay as long as your time outside the State does not exceed three tax years. The SSIA initiative is open to those who are resident or ordinarily resident in the State at the time of opening the account and for the full five years of its operation.

You retain ordinary residence for three tax years following the year of departure. Under ordinary residence, you are still liable for tax in the Republic but not on earnings accrued wholly outside the jurisdiction. That would include employment earnings in Britain.

I agree it seems unfair in this day and age when we are all being urged to be more mobile in our employment aspirations that the scheme does not allow savers to continue with SSIAs. However, it must be remembered that the scheme was introduced in the first place to encourage savings within the Republic.

With the economic downturn, there is no longer as much emphasis on stemming our catastrophic rate of credit growth but that was the original purpose. What people do outside the State would not impact on that, which is probably why people in your circumstances were not included in the scheme.

There is nothing stopping people within the Republic adjusting their payments should they find themselves in changed or straitened circumstances during the scheme. After year one, there is no obligation to make any further contributions into the scheme. You can pay for just 12 months and let your money lie there if you cannot afford to continue; you do not have to close the account.

Even within the first 12 months, you can change the amount you pay into the scheme, provided it stays within the overall limits of €12.70 to €253.97.

If a particular institution has set its own limits - for instance, some insist on monthly contributions of more than €50 or €60 - you can always transfer the money to another bank or building society that does not operate such restrictions. As long as you are in a variable deposit SSIA, there are no charges or penalties for such a move, which is one good reason for people of uncertain financial means to opt for the variable deposit option.

Rather late in the day I am evaluating my options on SSIAs. I've been reading the Ireland.com information, which is very helpful, but much of it seems to be from when the scheme started several months ago. Is The Irish Times planning to do an update of its information and comparisons of schemes? I'm sure I'm one of a large number of people who have left it late and would welcome help before the scheme closes. If a recent update has been done and I missed it, can you let me know if it's on the Ireland.com website somewhere?

Ms C.MacA., e-mail

Our final update was done recently and appeared in the newspaper with the relevant tables. There have been problems getting the up-to-date tables onto the website but they should now be there. You will find a link to the SSIA pages on the ireland.com home page

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.