Q&A

Dominic Coyle answers questions on SSIAs and deposit accounts.

Some SSIA accounts not eligible for payout

My wife and I have made full contributions to SSIA feeder accounts for both of our daughters for the past number of years as a saving programme to give them a nest egg to help when they get married. We opened SSIA accounts in their names.

As we understand it, the investment in an SSIA account must be from funds available to you and not be borrowed. As we, and not our daughters, made these contributions, are they entitled to the government top-up? We have accounts for ourselves.

Mr B. B., Galway.

I think you are going to find yourselves in a little bit of difficulty. It is certainly the case that the rules of the SSIA scheme dictate that the person opening the account should be the beneficiary of it and that the money used to fund the account should be from their own resources.

It is also the case that all account holders had to be aged 18 or over when the account was opened and resident in the State at that time.

You will have had to formally sign a Government declaration to this effect when you opened the account, including the name, address, date of birth and PPS number.

Account holders will have to sign another declaration as the account approaches maturity to state that they still meet the eligibility requirements.

Joint SSIAs were not allowed and there was only one permitted per person.

So, under the letter of the law, the accounts opened in the names of your two daughters are invalid. That presents a problem.

As you suspect, the accounts are not eligible for the Government payout. As ineligible accounts, they attract Government tax of 23 per cent on everything in the account - the already taxed money that was used to fund contributions, the Government bonus and any investment gain.

Are you alone in this position? I doubt it very much. What will the Revenue do? That is a moot point. Essentially, you have made false declarations at the outset; if you exacerbate this by making a further false declaration on eligibility now, you leave yourself open to prosecution.

The Revenue has plenty of work to do, but I imagine they will certainly make at least some random checks on whether people have abused the SSIA process.

Two types of deposit account

I have just cashed my SSIA (maximum contribution) and was shocked to receive €700 less than the €20,614 promised by AIB for a 4 per cent fixed rate investment.

I have been told I signed up for a "variable" rate of interest, which, over the period, gave a return lower than 4 per cent. I don't recall doing this but I must have.

Certainly, I have heard no mention of anything of either a 4 per cent return or whatever return an equity investment would give. As recently as last week, the RTÉ economic correspondent stated investors would get a 4 per cent return or the equity return. Caveat emptor! Other investors may be in for the same shock, so be prepared.

Mr E.R., Dublin.

I'm not really sure where to start. It has always been clear - and made clear by both SSIA providers and by commentators, including myself - that there were two broad types of SSIA account. These were equity-based and deposit. Within this latter group, there were fixed rate accounts and variable rate accounts.

This works in precisely the same way as mortgages do. The customer - in this case the saver - decides whether to opt for the certainty of a fixed rate or to take a chance that a variable rate will prove more beneficial over the term.

In the case of SSIAs, the sustained period of low interest rates during the course of the SSIA scheme means that fixed rates have, in general, proved a better bet - at least for those who secured a fixed rate of 4 per cent.

It is worth noting that different financial institutions offered different fixed rates on their SSIA offerings.

As it happens, the majority of SSIAs appear to have been invested in variable rate deposit accounts and the "average" payout consistently bandied about takes this into account.

To conclude, when it comes to any form of financial service, I would heartily agree that caveat emptor applies.

• 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.