Equity-based Special Savings Incentive Accounts (SSIAs) opened towards the end of the scheme will be the "clear winner" in overall performance, new actuarial analysis has claimed.
Consultants Life Strategies say the average equity SSIA opened as the scheme was closing in April 2002 will be worth €13,586 at maturity. The same account, opened just after the scheme was established in 2001, is expected to contain €13,404 when it matures, Life Strategies estimates.
The forecasts are based on the average monthly SSIA contribution of €158 and presume an exit tax of 23 per cent has been paid.
The projected returns compare to €12,886 for the average fixed-rate deposit account and €12,395 for the average variable-rate account opened in 2001.
If opened a year later, a variable account with average contributions is set to be worth €12,342, according to Life Strategies.
The difference between equity and deposit returns naturally becomes larger when monthly contributions start to increase.
The analysis finds that a maximum contribution (of €254 per month) equity account opened at the end of the scheme should contain €21,841 after tax, exactly €2,000 more than a maximum contribution variable account opened at the same time (see table).
"Excellent growth in stock markets over the past six months has further improved the standing of equity-based SSIA products," said Jim Murphy, director, Life Strategies.
The study concludes that the net return on money invested in SSIAs will range between 10.5 per cent per year for a variable deposit account and 14.4 per cent for an equity account.
So is it too late to buy into the equity gains by switching out of deposit accounts between now and the end of the scheme?
Mr Murphy said it depends on the account, with some fixed-rate products prohibiting switching. Even if your account allows a shift, it might not make complete sense, according to Mr Murphy.
He said "a lot will still depend on equity markets", which can move down as well as up. Variable deposit accounts could, furthermore, receive a fillip from rising euro-zone interest rates over the coming year.
As for switching into equities, Mr Murphy said the time left in the scheme represented a "very short period" for stock market investments. He suggested that a switch would work best if the account holder kept the funds in equities for at least a few years after the scheme closed.
Separate analysis from Bank of Ireland, also issued yesterday, finds that if equity markets deliver growth of up to 3 per cent for the remainder of the SSIA term, then equity accounts will remain "comfortably ahead" of deposit SSIAs at maturity.
Ronan Headon, head of savings with the bank, said: "We would advise our equity SSIA customers to continue saving for at least seven years and ideally up to 10 years to increase their potential growth."
