The pre-Budget scare that the Government was to cap SSIA contributions caused a consumer rush that will cost the State €75 million each year to 2005, the Minister for Finance has predicted.
Labour yesterday accused the Government of creating the panic that led tens of thousands of savers to top up their monthly contributions in the period leading up to the Budget. The party's finance spokeswoman, Ms Joan Burton, claimed the Government had deliberately encouraged the speculation about a cap, causing a rush by savers to maximise the amount of "free money" put into their accounts by the Government.
Under the scheme savers can put up to €200 a month over five years into an account, and the Government adds 25 per cent of the value of each contribution.
Some 1,170,208 Special Savings Investment Accounts were opened up to the closing date of April 2002. The estimated average contribution is €150 and until recently, the estimated annual cost to the Exchequer was €525 million - much more than the estimated cost when the scheme was first mooted.
However, in a written reply to a Labour Party question in the Dáil this week, Mr McCreevy said his Department had now increased this estimated cost yet further to €600 million per annum. This was because of "anecdotal evidence . . . that significant numbers of account-holders recently raised their monthly contributions". He said the precise cost depended on customer behaviour, so he could not give "a definitive figure".
Ms Burton said the rush to increase SSIA payments was a direct result of "pre-Budget spin that Minister McCreevy was about to cap contributions to SSIAs. The result is a cost to the Exchequer of €75 million next year and probably at least €300 million over the life of the scheme."
The press reported in the run-up to the Budget that a cap on contributions was under serious consideration in an attempt to curtail the scheme's capacity to put a drain on the Exchequer. Ms Burton claimed these reports were the result of Government "spin" and that the Minister did nothing to quash the speculation.
"This must be the most expensive and irresponsible piece of news management in the history of the state," she said.