Under a third of SSIAs to be cashed in 2006 - IL&P

Less than one in three special savings incentive accounts (SSIAs) are expected to be cashed in this year, according to one retail bank.

Brendan McEvoy, marketing manager of Irish Life's retail division, said only 31 per cent of the savers who hold SSIAs with the institution will be able to cash in their accounts by the end of this year.

The scheme, under which the Government gives savers €1 for every €4 they have invested, matures between April of this year and April 2007.

However, as the bulk of the accounts were opened close to the deadline for the scheme's closure in April 2002, they will not be ready to cash in until early 2007.

Mr McEvoy said yesterday that 69 per cent of Irish Life accounts will be cashed in during 2007, but more than half of the total will mature in the last month of the scheme.

He added that this would be the pattern across the industry. "Our picture is broadly representative of the market as a whole," Mr McEvoy said.

Those who invested in shares-based accounts are likely to fare best, he said.

Shares-linked accounts opened in April 2002, the last month of the scheme, will deliver a return of €22,000 for a maximum €254-a-month saving.

Those who opened similar accounts a year earlier and saved the maximum amount will wind up with €21,651. Those who were on straight deposit accounts will get just over €21,000.

Speaking at the Irish Life & Permanent (IL&P) personal finance briefing for 2006, Mr McEvoy argued that shifting from tax reliefs to SSIA-type pension incentives would immediately triple the number of people who are currently providing for their retirement.

"Our research indicates that if the Government simply changed the way they rewarded people for saving for pensions, they could transform the appetite for pensions," he said.

"Under the current tax scheme, just 21 per cent of people with no pension provisions indicated that they were extremely likely or very likely to start a pension this year.

"However, when we suggested that the Government move from the current tax arrangement to an SSIA-style Government payment to match the savings being made privately, the figures leapt to 54 per cent."

Mr McEvoy argued that such a move would cost no more than the current tax-based system, which gives reliefs against pension savings.

He pointed out that reliefs for someone paying tax at 42 per cent cost the same as giving them a €1 top-up for every €1 they save.

Mr McEvoy said that one of the main reasons people were not enthusiastic about the tax-based system was that it was complex and they did not understand it.