Equity SSIA holders urged to stay calm

There is no need to panic about falling stock markets, the Irish Financial Services Regulatory Authority has advised holders of equity Special Savings Incentive Accounts (SSIAs).

The financial regulator has seen a surge in calls from equity SSIA holders who are anxious about the impact that recent stock market turbulence has had on the value of their SSIA fund.

Consumer director Mary O'Dea said many callers to its helpline had seen the current value of their SSIAs fall by hundreds and, in some cases, a few thousand euro.

"This is obviously worrying for people, particularly those whose accounts mature within the coming weeks," she said.

But Ms O'Dea said equity SSIA holders should look at the bigger picture.

"Examine how your fund has performed since you started saving, instead of just looking at the losses of the last few weeks," she said.

Less than one-quarter of the 1.1 million people who took out SSIAs opted for the riskier equity version.

After a bad start in 2001 and 2002, the value of equity SSIAs pulled ahead of deposit SSIAs, which pay a maximum of 4 per cent interest on top of the Government's €1-for-€4 bonus.

Strong markets over the first few months of 2006 meant that the gap widened even further, and in March, Bank of Ireland released figures showing that people who opened an equity SSIA in April 2002 had a balance that was 15-20 per cent greater than customers who opted for deposit SSIAs.

However, a recent volatile spell in global stock markets will have lessened the advantage for equity SSIA holders and, if markets keep falling, there is a risk that much of their gains could be wiped out.

The Iseq index of Irish shares fell 1.2 per cent in June and is down almost 7 per cent over the second quarter of 2006.

"It is important to remember that, with equity-based investments, there is always an element of risk," said Ms O'Dea.

People who are nervous about how stock market performance will affect the maturity value of their SSIA should talk to their SSIA providers to see what options are available, the financial regulator added.

These include switching to a less risky fund such as a cash fund, where there is no risk to the initial contributions or the Government bonus. This would remove the threat of further losses.

However, it would also remove the opportunity to benefit from any future stock market growth.

The financial regulator can be contacted on its consumer helpline at 1890 777 777.