The Revenue Commissioners has produced a guide to the Government Special Savings Incentive Scheme dealing with the main queries associated with setting up and operating an account.
A Government Special Savings Incentive Account (SSIA) can be operated by banks, building societies, life assurance companies, credit unions, An Post, a registered investment firm and certain stockbrokers.
Savings are topped up by a tax credit of 25 per cent at the end of each month. In order to get the full tax benefits, an account must be held for five years from the date of first subscription.
Full or partial drawdown from the account before the five years has expired will result in a claw-back, or a partial claw-back, of the tax credit.
Tax will be charged on the early drawdown at the prevailing basic rate of tax plus 3 per cent - currently 23 per cent.
When an individual is opening an account, he or she must be 18 and must provide the savings manager (financial institution) with evidence of their Personal Public Service (PPS) number.
This evidence can be a payslip, or any communication from Revenue or the Department of Social, Community and Family Affairs, which shows their PPS number. A declaration form must also be signed by the saver.
PPS numbers, formerly known as Revenue and Social Insurance numbers, are issued by the Department of Social, Community and Family Affairs. Anyone who does not have a PPS number should contact their local social welfare office.
A declaration is required to be made at the end of the five-year term, which will contain a statement that the saver was either resident or ordinarily resident in the State throughout the period the account was held.
Savers can opt to lodge between £10 (€12.70) and £200 each month. While they can stop contributing after the first year and leave the account in place, during year one of the account, the saver must agree to put aside monthly amounts of £10 to £200.
If any of the conditions of the account are broken, it will lose its special savings status and 23 per cent tax will have to be paid on the full amount in the account.
The scenario for early withdrawals is slightly different. The Revenue gives an example of a saver who is saving £100 per month throughout the five year period. In the third year, he withdraws £500 net to meet a financial emergency. His account is topped up by a tax credit of £25 each month and at the end of the term he has a balance of £7,951 on the account.
This is made up of:
£6,000 cash savings;
a tax credit top up of £1,500;
income/gains of say £1,100;
less the drawdown of £500;
less tax on that drawdown of £149 (23 per cent of £649).
In year three, the savings manager will deduct 23 per cent of the cash drawdown from the account, in this case £149, and pay it to the Revenue.
Inquiries in relation to SSIAs should be made to the SSIA Section of the Collector-General's office at LoCall 1890-463626. The scheme is available until April 30th next year.
