The cost to the State of the Special Savings Incentive Account (SSIA) initiative could rise by up to €500 million if savers increased their monthly contributions to the maximum permitted, according to Bank of Ireland.
The Government is currently facing a bill of almost €3 billion to meet its promise of a €1 bonus for every €4 invested under the scheme. About €15 billion has been invested to date.
But according to new research from Bank of Ireland, if savers who are not already paying the €254-a-month maximum were to boost their contributions to that level, it would add a further half billion to the State's SSIA bill.
The State's exposure has already doubled from the original €1.5 billion estimate because account holders have moved to increase their contributions to take full advantage of the Government's bonus offer.
According to a survey of 400 Bank of Ireland SSIA customers by Lansdowne Market Research, the average monthly contribution to SSIAs is €171.
Its estimate on the potential bonanza still available to the total 1.13 million SSIA savers is based on the finding that 53 per cent of its customers are not contributing the maximum amount. The bank, which claims a 23 per cent share of the market, has extended its findings to all SSIA holders.
Mr Ronan Headon, head of savings and investments at Bank of Ireland Life, said increasing contributions to the maximum was "obviously a very sensible step for consumers".
He said there was no evidence that SSIA holders were having difficulties affording their contributions. Less than 10 per cent of customers had stopped saving under the scheme, compared to typical drop-out rates of over 30 per cent on other savings plans.
Almost a third have already increased their contributions, while 47 per cent said it was either very or fairly likely to increase contributions.
The first SSIAs are due to mature in May 2006. However, the majority of accounts will not mature until 2007.
Only 17 per cent of the bank's customers said they intended to spend all their SSIA money once it matures, with a further 25 per cent saying they would spend some of it and reinvest the rest.
The bank said the findings exploded the myth that most SSIA holders plan to indulge in a massive spending spree and lose their newfound savings habit.
The findings were echoed in a new survey of over 600 homeowners by Irish Mortgage Corporation, which found that over half of SSIA holders plan to reinvest some or all of the money.
Mr Brian Forrester, managing director of Bank of Ireland Life, called on the Government to eliminate, reduce or defer the 23 per cent exit tax on interest gained under the SSIAs in cases where the money is transferred to a pension fund or the savings are maintained for a further three years.
Some 86 per cent of the bank's customers said they would continue to save if the Government introduced a bonus or tax incentive, while just over half said they would transfer all or part of their SSIA money into a pension if given a tax incentive to do so.
