Savers will be able to change the amount they invest in the first year of the new Government Special Savings Incentive Scheme following a dispute between the Revenue and the Irish Bankers' Federation (IBF).
The formula reached by the two sides appears to get around the Department of Finance condition that the amount saved each month in the first year cannot be reduced.
Under the scheme, which comes into effect from May 1st, savers must make a commitment to save a specific monthly amount between a minimum of £10 (€12.7) and a maximum of £200. The Government will add £1 per month to every £4 saved. According to the IBF, early guidelines from the Revenue on the scheme caused "misunderstandings". Setting out the minimum and maximum monthly amounts, the guidelines said: "Within those limits, there is total flexibility".
Some institutions interpreted these guidelines as allowing savers to save whatever they could each month as long as it was within the minimum of £10 and the maximum of £200. For example, a saver who started to save £100 per month could cut back to £50 per month if their circumstances changed.
However, in recent days, the Revenue said savers could only vary upwards the monthly amount saved in the first year. According to the IBF, some financial institutions had introduced their products "on foot of understanding otherwise and having good grounds for their understanding".
AIB confirmed yesterday that it had introduced such a product.
Arguing that they had used the initial guidelines to produce and market their products, the banks fought to retain them. The formula agreed with the Revenue provides that a special account will not be invalidated if the terms provide for a monthly sum higher than £10 as an "indicative" savings figure, conditional on the saver having the funds, as long as the agreement includes an unconditional agreement to save a minimum of £10. By using the terms "indicative" and "unconditional", the banks will now be able to offer products that will allow savers to contract to save any amount up to £200 per month - the indicative amount - but to vary this amount each month as they wish, as long as they save £10 - the unconditional amount.
The Revenue confirmed last night that these terms had been agreed. A spokesman said there had been "a clarification" of the earlier guidelines. But he insisted that the discussions on the full technical guidelines for the scheme were not yet concluded.
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