If there is any one issue of interest to Family Money readers at the moment, it is that of falling interest rates and the effect they are having on deposit income and capital depreciation.

This is not surprising given that there is approximately £4.5 billion tied up in Special Savings Accounts (SSAs) and interest rates are sliding downwards.

A report just published by National Deposit Brokers, the specialist money brokers, has tracked SSA interest rates. It compares their performance to that of Special Investment Schemes and Special Investment Accounts, the low-tax investments that were introduced in 1993 as an alternative to the SSAs. Though not particularly suitable as a regular income investment, SIAs do need to be considered for anyone who needs to protect the integrity of their capital long term.

Special Investment Schemes and Accounts attract a 10 per cent tax rate and are "pooled" investments in which at least 55 per cent of the fund must be invested in Irish equities, 10 per cent of which must be invested in smaller capitalised companies. The balance can be invested in other equities, gilts or cash deposits.

According to the NDB report, between April 1993 and December 1997, Dublin interbank rates fell by approximately 2.5 per cent from a high of just over 8 per cent gross to current levels of between 56 per cent gross, with this downward trend continuing. In comparison, says NDB, the returns from Special Investments, such as the Bank of Ireland Asset Management one-year and 18-month Eiri Unit Trust Equity Funds and Irish Life's Special Investment Equity Fund over five years have been extremely good. Gross returns have been 50.32 per cent, 74.89 per cent and 160.21 per cent respectively. However, "they are still relatively new products as far as long-term investments go".

Despite this remarkable performance, the launch of Special Investment Schemes and Accounts "was not successful for a number of reasons", according to the report. "Firstly, interest rates were high at the time, and the outlook for equities was not particularly positive. "Secondly, the competition from SSAs offering high guaranteed returns, and equally favourable tax treatment `of 10 per cent, now 20 per cent' was difficult, if not impossible, to beat. The lack of products was also a barrier as few of the investment companies produced Special Investment Accounts and the ones that did were a well-kept secret as there was little or no marketing at the time."

Tracker bonds were also introduced at the same time and have dominated the lump-sum market, says NDB.

Although there is now more than £200 million invested in Special Investments, the last few years have been a missed opportunity for many who would have greatly benefited from the capital appreciation factor of the SIAs. The NDB report includes a table and a graph. The table records the 30 years historical performance of Irish and international assets. It shows how Irish equities have consistently outperformed international equities over every period and what might have been if Special Investment products in this case the Bank of Ireland Eiri Equity Fund had been on the market over the same long term. It then tries to answer the obvious question: is this a good time to shift funds from deposits into this higher-risk investment market?

The report notes a survey done a couple of years ago which compared a "lucky" and "unlucky" investor, each of whom invested £500,000 between 1974 and 1995. "The lucky investor invested five tranches of £100,000 at each of the market troughs, thus getting maximum benefit from each rise; the `unlucky' investor invested his £100,000 tranches at the top of each rise, suffering most from the falls." Both portfolios grew by more than 1,000 per cent over the two decades, but "of greater interest is the fact that the `lucky' investor's portfolio grew by only 12 per cent more than the so-called `unlucky' investor". According to NDB, points to consider about the timing of investments include:

over the past 40 years, the average rise during a bull market was 140 per cent, while the average bear market fall was 22 per cent;

the average length of bull markets was 45 months just under four years while the average bear market fall lasted for just one year;

despite its notoriety, the stockmarket crash of 1987 was the most benign in terms of both size and duration since the 1960s.

"The overall conclusion is that bull and bear markets will always occur. The sensible investor will realise this and take a long-term view, accepting the ups and downs along the way."

Copies of the Consumers Guide to Special Investment Accounts are available from National Deposit Brokers at 1800 322 422.