A successor to the SSIA scheme based on existing tax relief on pension contributions has been propsosed by the investmnet management industry.
The Irish Association of Investment Managers (IAIM) recommended today that the Government should waive exit tax on any transfers of SSIAs into its proposed Flexi Investment Account (FIA).
The FIA would allow monthly contributions of €250 or €3,000 a year - equivalent to 10 per cent of the average industrial wage.
The scheme is based on existing tax allowances for pension fund contributions and offers access every five years to 30 per cent of the previous five years investment. All proceeds of an FIA would be tax-free at retirement.
According to Gary Connolly, chairman of the IAIM Retail Funds Committee, the savings habit promoted by the SSIAs needs to be encouraged and that there are sound policy reasons for doing so.
"We would ask the Government to continue to support the development of a savings culture to cover both existing SSIA savings and a future savings product," he said.
Mr Connolly referred to research by Bank of Ireland and Goodbody stockbrokers showingthat 76 per cent of SSIA customers were first time savers
Non-tax payers ie; those earning the minimum wage, would receive a 20 per cent monthly bounus similar to the SSIA scheme. Lower income earners would receive tax relief at the standard rate of 20per cent and higher rate tax payers would only be eligible for tax relief at the standard rate only.
The IAIM said the cost to the Government of this incentive is likely to be very small as exit tax is only on the growth in the fund, not on the contributions by either Government or individual.
The IAIM has forwarded its proposal to the Departmnet of Finance.
and l ow income earners made up 45 per cent of the accounts.