While the new Government scheme to encourage people to save rather than spend starts today, savers have until April 30th, 2002, to open Special Savings Incentive Accounts (SSIAs). Since each individual can only have one account, savers should take time to assess the products on offer to find the one best suited to their own needs.

Financial institutions have initiated major marketing campaigns as they compete for a slice of a market that could be worth up to £1 billion (€1.27 billion) over the next year as savers take advantage of "free money" from the Government.

Under the SISS, the Government will give account holders £1 for every £4 they save in accounts which must be maintained for five years. Savers can save between £10 and £200 per month - an account holder saving £100 per month would have £25 added to their account each month.

Over five years this saver will have saved £6,000 and the Government will have added £1,500, giving a fund of £7,500 before any interest or investment returns. The 25 per cent Government subsidy is worth about 8.9 per cent per annum to an investor who saves over the full five years before any interest earnings.

Financial institutions are offering two broad categories of accounts - cash type deposit accounts or equity-based investment accounts. Savers opting for deposit accounts will have a relatively safe fund earning a fixed or variable interest rate return depending on the product chosen. Equity-based products involve higher risks because they are based on stock market returns and the value of the original investment can fall as well as rise. While they involve more risk there is the potential for greater returns.

Savers prepared to take the risks associated with an equity based product need to examine the charges of the different institutions for managing and administering their savings. In some cases high charges could wipe out most of the returns earned and the saver will not get an adequate return over the deposit return to compensate for the extra risk involved. The return for the saver will depend on the product chosen, the performance it produces and the charges involved.

Charges on products launched so far consist of all or some of the following - bid-offer spreads, entry/exit charges, policy charges and management and administration fees with different levels or combinations from most of the financial institutions. Because savers are building up their investment fund in monthly installments rather than investing a lump sum for five years, some experts consider the five-year period is not long enough to generate a good return when charges are taken into account. But with equity markets now well off their high levels other experts suggest equity-based savings should outperform and that the spreading savings over five years also spreads the risk.

Savers need to consider the type of account they want, the amount they can save each month and that they can continue to save for five years. Savers who take money out of the fund during the five years could lose out badly. At the end of five years the only tax charge on a savers fund will be on the interest or investment return earned.

However, where funds are removed during the five years, tax will be charged on the full amount taken out. In this case savers could find they end up with less than they put into the fund. A saver who cannot continue to save should try to leave the funds already saved in the SSIA - while the Government subsidy will stop the fund will continue to earn interest/investment returns and the saver will avoid the penal tax on early withdrawal.