Financial institutions will offer attractive investment products under the new Special Savings Incentive Scheme, Mr Noel Minogue of the Irish Association of Investment Managers insisted yesterday. The chairman of the retail funds committee was responding to arguments that savers could be better off in deposit rather than investment accounts under the scheme because investment returns may not be sufficient to cover charges and produce a return reflecting the extra risk involved. He advised savers to wait and see what products became available.

"Savers should not assume that investment account charges and structures will be the same as apply for lump-sum savings. In a competitive market a range of charges and funds will be offered," he said. Some institutions may even offer accounts at low charges as loss leaders depending on how they wanted to position themselves in the market, he added. There would be a trade-off between the cost of administering the scheme and the higher volume of business at a lower margin.

Many investment products offered under the scheme would not have bid/offer spreads or entry prices, he said. But he agreed that savers wishing to draw out funds early should not go into equity products. They should look at products "less exposed to risk". And he suggested savers should consider continuing their saving accounts after the five-year period or rolling over the funds saved into their pension funds. At the end of five years, the tax charge would be triggered and the Government subsidy would stop but the money saved could stay in the fund, he said.

The survey showed that investments produced better returns than deposit accounts over time, he argued. He quoted a 12.94 per cent per annum average return over the five years to the end of December 2000 on managed funds. This was net of tax and annual charges, he emphasised. But, indicating the risks associated with investments, the survey showed an average return on managed funds of just 2.32 per cent after tax and changes for 2000. Investment products now accounted for about 30 per cent of the personal savings market and with low interest rates, a better tax environment, increasing wealth and the new incentives for regular saving, growth in funds invested should continue this year, he said.