Q&A

My husband and I opened SSIA accounts with ACCBank in August 2001. Each account will mature in September 2006. Both are interest-bearing accounts and both are subscribed at the monthly maximum amount permitted (that is 253.95 each).

SSIAs

We are considering a move overseas, effective from January 2004, for a period of at least two years and probably five. How will this affect our SSIA accounts?

Will the accounts "cease" and have to be cashed in? Can we continue to contribute at the existing rate and allow the accounts to continue until maturity in 2006?

If the accounts must be terminated, are there any taxation or other penalties due to early cessation?

We had designated the funds that would have been available within the SSIA in 2006 for education costs for our children. If it is not possible to continue with the SSIA funding as we had intended, can you recommend an appropriate saving strategy to fund third level education costs for four children?

The required funding timeframe will begin in 2006 and last until about 2016?

Ms J.O'D., Roscommon

There is no problem with you continuing to operate the Special Savings Incentive Accounts from abroad for the period you are away, as far as I can see.

It all comes down to residence. When the scheme was first set up by the Minister for Finance, Mr McCreevy, the key delimiter on eligibility was residence. This was largely to stop people outside the State taking advantage of the phenomenally generous Government contribution, something which would have gone against the raison d'etre of the scheme which was to cool spending and encourage saving within the Irish economy.

The rules state that you must be resident, or ordinarily resident, in the State to open and operate your account. Both you and the institution with which you have the account have a responsibility in ensuring compliance in this area.

Residence, in this sense, has a particular meaning and refers not to where you live physically - although the two are often the same - but to where you are resident for tax purposes.

From your point of view, the important element is ordinary residence. You were resident in the State when you opened the accounts and have continued to be so since.

However, this will, in all likelihood, cease when you move abroad next year. At that stage, you will almost certainly pay income tax on your foreign earnings in the country to which you move.

You will remain, however, ordinarily resident in Ireland for three full years following the year of your departure. If you leave Ireland in December 2003, you would be ordinarily resident until the end of the 2006 tax year; if you hold off until January 2004, as you suggest, you would be ordinarily resident until the end of 2007.

As you can see, either date would leave you fully able to continue paying into an SSIA which will mature in September 2006.

In terms of the tax liability of someone who is "ordinarily resident" in the State, such people pay Irish income tax on all income except income from work conducted wholly outside the State (which covers most people) and investment income up to €3,810 in a given year. As it happens, your SSIA gain will be taxed within the fund before you get access to it at maturity so there should be no issue for you there.

Remaining within the eligibility criteria is important as your fund would face a big hit from tax if you were forced to close it prematurely.

The rules state that those who stay with the scheme until it matures pay a rate equivalent to the basic rate of income tax plus three percentage points - that is 23 per cent - on the investment gain on the account.

Those closing early, however, have to pay that 23 per cent on everything in the account - the investment gain, the Government contribution and even their own contributions which come from after-tax income.

Irish Nationwide

The newspaper has carried several items over the last few months about the Irish Nationwide Building Society and the impending change in legislation allowing them to become a PLC while abolishing the present five-year rule blocking any takeover bid. Can you help with any of the following queries?

1. At present what are the rules in INBS for becoming a "Member",that is opening an account that would qualify customer for shares in the PLC?

2. The names of any such accounts?

3. The terms which apply, for instance perhaps a minimum balance for a set period of time?

Mr C.G., e-mail

Becoming a member of the Irish Nationwide Building Society is becoming a more expensive business all the time. At one time, it took just £1 to open a share account. Now the figure is €20,000.

The other important thing is that the account must be a share account, not a deposit account. The share accounts currently available from the society are:

n fixed rate bonds;

n fixed rate income bonds;

n fixed term accounts;

n Goldsaver 90;

n Goldsaver 50;

n Classic Quarterly;

n Premium Access.

There are others that qualify but are no longer open to new members. Basically, the important thing is that the saver account be a share account. Deposit accounts, including SSIA accounts, do not qualify.

Once you open an account, you need to make sure you keep a certain minimum in that account.

At present, for new accounts, the minimum is €20,000. For accounts already open, the minimum can be as low as €125 but that must have been the minimum balance continuously since six months before the end of the financial year preceding any ballot on the issue.

Borrowers, also, can be members. Those holding mortgages with an outstanding balance of €625 are considered members of the society.

It's important to note that even if you do have sufficient resources and open a relevant account today, there is no guarantee that you will be eligible for any windfall arising from the conversion of the society. The key is when any conversion proposal is announced by the society.

Only accounts of the relevant type that have been open for a minimum of two years by that date will be eligible for a windfall.

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.