Q&A

An Irish Times guide to the world of personal finance. This week  your questions on SSIAs.

Q.I am an Irish citizen living overseas. Can I still avail of this savings scheme? I had a PRSI number when I worked there seven years ago?

Ms I.NiC., e-mail

The Special Savings Incentive Scheme closes next week so I will try to squeeze in as many of the outstanding queries as possible this week.

In your case, Ms I. NiC., you will not be eligible to open an SSIA account. To open an account you must be over 18 and, most importantly, tax resident in the Republic. My thanks to Mr J.K and Mr C.H. for reminding me again that while you may become ordinarily resident after the account is opened and remain eligible to hold the account, you must be tax resident here at the time the account is opened according to Revenue rules.

In any case, having been out of the State for seven years, even ordinary residence, had it been allowed, would not have qualified you to open such an account as ordinary residence runs out three tax years after you leave the State.

I am over 70 years of age and would have liked to participate in the above scheme but am very disappointed to learn that it is not possible to open an account in joint names with my wife. Perhaps this is one reason why the take up on the scheme is below expectations. Why is it not possible to have an account in joint names with one's spouse?

Mr D.O'D. Offaly

I cannot say why the Revenue Commissioners and the Minister for Finance, Mr McCreevy, decided at the outset to insist that the accounts could not be opened in joint names. The basic premise of these accounts is that the individual saves into their own account from their own resources and it may simply be that the Revenue decided this would be policed more easily if there were no joint accounts.

Having said that, there is a provision that spouses can contribute from their combined resources to each other's accounts. So, although you cannot have a joint account, you can both contribute to an account in either of your names or, resources permitting, you can each open an account funded by your combined savings, and maximise the amount you can save. As such, I am not sure why the lack of joint accounts should prevent you or your wife opening an SSIA.

Reading your reply to the first query today you are stating the minimum is €12.70 not €12.50. I have opened my SSIA last week at the minimum of €12.50 with the EBS, and I have just checked the ACC booklet which states the minimum is €12.50. Which is correct?

Mr E.F., e-mail

This is all customers need as they go into the final days of the scheme - especially when any errors could invalidate the whole policy. The Revenue Commissioners have told me categorically that the minimum monthly payment into SSIAs is €12.70 - the nearest whole cent to the direct exchange rate of £10 into euros - and they are wrong.

According to the Finance Act 2001, once the euro became a reality on January 1st, the old £10 minimum was rounded down to €12.50 from €12.70 and the £200 maximum became €254 rather than €253.95. My thanks to the EBS for pointing me in the right direction - Finance Act 2001 Section 33, subsection 2, clause (a).

The confusion arises for people who opened their accounts before the arrival of the euro. They will find their contributions moving to €12.70.

So, rest easy. Your €12.50 SSIA is valid and the EBS and ACC, among others no doubt, are spot on.

Three of my family joined ACC, as it was linked to the ECB rate (3.25 per cent). As we have opted for the highest amount, €254 per month each, we see no advantage when other banks are offering 4.5 per cent. Could you please give me the name and number of the form to use when transferring to another institution?

Ms Mc K. Monaghan

The form to which you refer is Form SSIA6. As you say, ACC will match the European Central Bank rate but this is well below the best offerings at the moment. However, it makes little sense for institutions to be offering some of the higher rates we see at the moment and the suspicion is these will fall sharply once the closing date has passed.

Basically, many of the current rates are loss leaders to attract business - business that the institutions have learned from experience that they subsequently keep for the most part, regardless of rates.

For the sake of the one week, or even one month, I would suggest you stay put and see how rates settle after the April 30th closing date. For what it is worth, First Active and Northern Rock also commit to matching the ECB rate, although both have minimum investment thresholds above the €12.50 base.

I'm interested in opening an equity-based SSIA and have two queries:

1. I've read conflicting reports re the security of capital invested in these schemes. Some say you will not lose your capital or the Government investment, just your return on investment and yet others say you can lose both yours and the Government's capital.

2. Quinn Direct and EBS come out top on charges but are there any reports as to which are the best fund managers over last five years? After all a higher charge may not be so bad if the return is higher.

Ms A.F., email

The security of your investment capital depends on the terms of the equity-based fund you choose. If you choose a guaranteed product, you will have a guarantee on the security of your capital to some degree but also face a price in terms of the amount of the return which you will receive.

In most cases, straightforward equity funds can lose your capital - including the Government contribution - in the same way they can multiply it. Read the small print carefully before you sign. Quite frankly, if you want security, and especially if you are looking purely at a five-year term, you should stay away from equity funds and opt for one of the deposit-based accounts.

Quinn Direct and EBS are tops on charges but, as you say, there is no guarantee that the lowest charges will equal the best return. I am not aware of any table that ranks the performance of the funds on offer to SSIA account-holders over the last five years. In some cases, the funds were designed specifically for the SSIA scheme.

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.