Existing providers may not be the best choice for reinvestment, writes Caroline Madden

If you're not one of the 1.17 million people who took out an SSIA, look away now. But for those who wisely signed up half a decade ago for the Government's generous offer of free money, the time has come to examine the fruits of your savings.

Although two-thirds of all SSIA accounts have yet to run their five-year course, the first tranche of accounts matured last May. A review carried out by Becketts, the personal financial planning division of Hewitt Associates, examined the gross payouts received by holders of maturing SSIAs accounts between May and August 2006. While the data only covers the first four months of maturities, one thing is already clear - not all SSIAs were created equal.

You may well have squirreled away exactly the same amount in SSIA contributions as your neighbours, friends or colleagues. But depending on the provider and the type of account you opted for, they could potentially pocket up to €11,000 more when their account matures, if the trends identified so far continue.

For simplicity's sake, the Becketts review focused on individuals who contributed the maximum of €254 for 60 months, without making any investment switches during that time. This eliminated exceptional cases where individuals may have played in and out of the stock market, or availed of special employee offers.

Unfortunately many of the larger institutions were either unwilling to participate in the survey, or simply failed to provide the requested information. But of those who did participate, the star performer was Canada Life's unitised plan which invested in an Irish property fund and produced the highest gross payout (ie before the 23 per cent exit tax is deducted from investment growth) in the first four months. Some 62 SSIA savers in this plan received a payout of €29,535 each in July 2006.

However, another investment-type plan - Irish Life's Techscope fund - trailed at the back of the pack, making the lowest recorded gross payout of just €17,727 to four SSIA holders in May. The review found that even cash funds produced a superior rate of return.

Unitised funds, which were generally equity-based, have so far produced the most extreme results. However, only a very small proportion of holders of maturing SSIAs actually participated in the best and worst performing funds. Instead, the bulk of savers typically received roughly €20,000 from deposit accounts offering a variable rate of interest.

"You can see a consistency on the deposit side," Mark O'Sullivan, a director at Becketts, says. Although variable-rate accounts were vastly more popular, fixed-rate accounts generally produced a higher maturity value, typically in excess of €21,000.

"People, in general, did get the returns relevant to the risk category they went into," O'Sullivan says. However in 2001 and 2002, when SSIAs were being taken out, the stock market was doing little to instil confidence in prospective investors. In fact the Government bonus was almost being wiped out by negative returns. This had a huge effect on people's mindset, O'Sullivan says, and led to some 80 per cent of SSIA savers opting for the "safe haven" of low-risk deposit-type SSIA.

By and large, the 20 per cent of SSIA savers who held their nerve and rode out the downturn in the belief that markets would recover by the time they cashed in their chips, have been amply rewarded. "If you went into equities, in the main you got outperformance," O'Sullivan says. "Those who took the risk have been rewarded for that risk."

"The punters who went in to the unitised side are probably going to return something in the order of 70 per cent," he points out.

The main purpose of the Becketts review is to enable investors to make informed decisions on the best home for their SSIA windfall by comparing the track records of various institutions and funds to date.

SSIA holders are being enticed by their existing providers to reinvest their lump sums, but O'Sullivan stresses the importance of being able to weigh up their performance against other providers.

He sums this up in simple terms: "If I went into a restaurant and got a bad meal, or I bought a suit of clothes and was disappointed with it, would be less inclined to go back to that particular institution."

For this reason, he describes the reluctance of certain large institutions to participate in their study as "slightly disingenuous", as SSIA savers in such institutions are "not being given the opportunity to evaluate whether they were in a good, bad or indifferent [ fund]".

O'Sullivan advises that individuals considering rolling over their SSIA lump sum should be asking themselves the following question: "Is it in the right stable? If it is in the right stable, is it on the right pony? Or should I be switching it to another fund?

"The question that really comes out of all this is, Do you add to the existing SSIA vehicle that you have or convert the vehicle?" he says. "Do you continue with the institution, or do you continue saving with an alternative institution?"

He cites Irish Life as an example. While its Techscope fund may have failed to produce the goods, the Becketts study reveals that several other Irish Life funds, such as Europescope and Celticscope, produced impressive results - albeit to only a small number of individuals.

But whether the majority of people have any intention of reinvesting their SSIA windfall is a moot point. A recent report indicated that just 1 per cent of SSIA holders have signed up for the Government's follow-up pension scheme, despite the bonus on offer.

The EBS said this week that, according to research carried out by Behaviour and Attitudes, 25 per cent of its SSIA customers whose accounts have matured have reinvested the full payout. Some 15 per cent said that they had already spent all or most of their windfall, while a further 24 per cent admitted that they haven't yet done anything with their recently matured funds. Although 14 per cent had intended to put their SSIA into a pension, only 7 per cent actually did so.

While O'Sullivan advises that people should continue saving, he says that the word on the ground is the majority of people have already earmarked their SSIA for something more tangible than a pension - with new kitchens, upgrading the car and holidays regularly featuring on SSIA wishlists.

Whatever your intentions for your windfall, O'Sullivan advises people to take care with the paperwork.

Savers must sign an SSIA4 declaration (which they should receive from their SSIA provider) and return this to their provider within the three months leading up to the maturity date. If the declaration is not signed and returned on time, the SSIA "ceases" instead of maturing. In this situation the exit tax of 23 per cent applies to all the savings in the account, rather than just the accrued interest or investment gain.

Even simple things such as instructing your financial institution to stop deducting contributions from your account once your SSIA matures are being overlooked by people, O'Sullivan has found.

Overall, though, it looks like conspicuous consumption, rather than deferred gratification, will be the catchphrase of 2007.