Q&A

An Irish Times guide to the world of personal finance

SSIAs

I was born and educated in the Republic but since my marriage in 1965 I have lived in Northern Ireland. For most of that period I have paid my income tax in the Republic and, although now a retired national teacher, I still pay my tax in the Republic. Do I qualify to partake in the SSIA savings scheme?

Mrs E.F., e-mail

Yes, you do. Eligibility for the special savings incentive account scheme relies heavily on tax residence and, if you are paying tax in the Republic, you qualify under that criterion. You evidently are over 18, so there is no reason why you should have any trouble opening an account.

I opened a special savings incentive variable deposit account with ACC last summer. May I move my SSIA variable deposit account before April 30th, 2002, to another institution that is offering a better rate and may I do so without incurring any penalty?

Ms A.D. e-mail

The rules of the Special Savings Incentive Scheme allow for transfers of accounts between providers. In the case of variable deposit accounts, these are without penalty. You will need to check with the institution to which you wish to transfer that it is prepared to accept the transfer.

Having said all that, I would suggest you consider any such move carefully. ACC is, with a couple of others, offering the most competitive deposit variable account guarantee - it says it will not allow the rate of interest drop below the base interest rate set by the European Central Bank.

Certain other institutions may currently offer higher rates but, in almost every case, they have less competitive guarantees and there is nothing to stop them dropping later, hoping that people will not notice. After all, once past the April deadline many people will relegate the SSIAs to the back of their minds for the five-year savings period.

Investment

I invested £5,000 in Irish Life's Scope Funds a couple of years ago and for the first few months they performed quite well. However, since then they have done rather poorly. I invested £2,000 in Europascope, £2,000 in Telescope and £1,000 in Celticscope.

I realise that stock markets have performed badly in the past few years but was wondering if you could offer any advice as to whether I should cash these funds in or use the switching facility to another of the scope funds.

Is there any hope that the telecoms sector will bounce back or is it a dead duck? There is an early encashment penalty. I appreciate that you do not give investment advice but would appreciate your comments.

Mr T.W., e-mail

Irish Life has marketed these accounts, generally to less-experienced investors, as an easy way to invest and make money from the stock market. In my view, they have been irresponsible on several issues.

First, on the inside cover of the glossy Scope brochure, they dismiss as a myth that people should only invest in equities money that they can afford to lose. This is not a myth; it is responsible investment advice to anyone considering putting money into the stock market, as the legion of small Eircom shareholders have found to their cost. Indeed, the Scope Funds invest in a number of companies that have gone through rough patches in recent times.

Irish Life also illustrates its various products by showing the return the various funds would have made in the period between 1995 and 2000. While this may be entirely within the regulations, it is more than a little disingenuous for the company to sell such products to novice investors in a very uncertain climate for equities on the back of an illustration drawn from the most bullish years for global stock markets.

While Irish Life will point to the fact that, historically, equities have outperformed other investments over time as a group, it does not necessarily follow that over any given timeframe - such as the five years from 2001 - the same will happen. It is also true that, while equities as a whole have historically outperformed other investments over time, individual equities and sectors have not.

Turning to your particular situation, you need to accept that investing in equities is a medium- to long-term investment. There is no point in getting out at the first sign of trouble. At the same time - and without, as you acknowledge, being in a position to give specific financial advice - it does appear you have a lot of eggs in very specific baskets.

Celticscope invests in Irish shares. This is a very small market, disproportionately influenced by activity elsewhere - especially the US - and dependent largely on five or six stocks that dominate. When these encounter problems - such as Elan and AIB recently - your funds get hit harder than one would like from the performance of individual shares.

You have also opted for Telescope, which concentrates on telecoms shares - another single-sector investment. The recent performance of telecoms stocks shows the need for caution in such investments.

I would suggest, initially, you look at switching some of your investments to more broad-based options within the Scope family. History says shares will recover; the question for you is whether the recovery will lift all sectors and whether it will happen in time for your investment?

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.