Dominic Coyleanswers your questions

Beware those SSIA lump sums

I held a fixed-interest SSIA with Bank of Ireland. As it approached maturity, the bank sent me some information about it together with details of a Special Bonus Saver Account.

This, I was told, would allow me to roll my SSIA lump sum into an account earning interest of 3.75 per cent. I would subsequently be able to invest monthly in the account at a rate of 4.75 per cent.

However, when I got my final SSIA statement, I noticed that my first post-SSIA contribution was receiving the lower interest rate. I contacted the bank and was told that this was a technical glitch, down to a computer but that nothing could be done about it.

I know it is not a lot of money but it is the principle of the thing. The bank is paying a lower rate of interest than it advertised. I just want to alert other SSIA investors in case they find themselves in the same situation.

Ms C.K., Dublin

I thought I had heard most angles on the SSIA story by this stage but, apparently, not so. And, given that two-thirds of SSIA holders have yet to see their accounts mature and that the financial institutions are tripping up over themselves in an effort to get savers to roll-over those SSIA lump sums into other investments, your warning is very timely.

Maturing SSIAs at Bank of Ireland automatically move into the Special Bonus Saver Account which, at the time your SSIA matured, was paying a fixed rate of interest of 3.75 per cent for the first three months, falling to the European Central Bank rate thereafter. Any further regular monthly savings were receiving interest at the ECB rate (then 3.25 per cent) plus 1.5 percentage points - effectively 4.75 per cent - for the first 18 months of operation.

You noticed when your SSIA statement came in that your first regular payment was included and was therefore according interest at the lower rate applying to the rolled-over lump sum.

In this case, it has to be said, your query had Bank of Ireland flummoxed for some time. Apparently, the answer lies in the mystery of the 61st month.

While everyone works on the basis that the SSIA is a five-year investment, the truth is that, in Revenue's eyes, the accounts mature "30 days after the fifth anniversary of the end of the month in which the SSIA was commenced".

Thus, the 60th payment in an account opened in May 2001 was made in April 2006 but the account only matured at the end of May 2006 - the 61st month.

That's all fine and well, but when you took Bank of Ireland up on its option of continuing your saving through the Special Bonus Saver Account, it meant that account only activated when the SSIA matured in Revenue terms.

As part of your communication with the bank to confirm your decision to continue your regular savings, you signed a "saving contribution form" indicating you wanted your direct debit to continue. Unfortunately, the direct debit knows no different and made your first "regular savings" contribution in that 61st month - ie, before the new account was activated.

As a result, it attracted the lower rate. While Bank of Ireland is comfortable that it has applied the rules correctly - and it has - it acknowledges that there clearly was some breakdown in communication in your interaction with bank staff at your branch.

It also acknowledges that the form you filled up in order to continue saving through the new account does not make it expressly clear that the extra month to formal maturity means the first of continuing direct debit payments will not attract the higher regular savings interest rate.

As a result of your experience, I gather the form will now be amended to make this crystal clear for others following the same path in the months ahead - important given that Bank of Ireland group is the largest single provider of SSIA accounts.

The bank does point out that, while your first contribution attracted a lower interest rate than expected, you will not lose out as you will still receive 18 subsequent contributions at the higher advertised rate.

You should know that the bank is now paying 4 per cent for the first three months on rolled-over SSIA balances in this Special Bonus Saver Account for the first three months and the ECB rate plus 2.75 percentage points for the first 18 months on subsequent regular savings.

This is due to:

a) an ECB quarter-point rate increase in the interim - the ECB rate is now 3.5 per cent;

b) increasing competition among the banks on SSIA roll-over products that has seen Bank of Ireland improve its offering.

As a gesture, I gather the bank has offered to backdate these higher interest rates to your first contribution to the Special Bonus Saver Account and is also sending you a voucher in recognition of the confusion that occurred. Hopefully, everything will run smoothly from here.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, 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.