Holders of Special Savings Incentive Accounts (SSIAs) are unlikely to embark on a mass shopping spree, according to research by Bank of Ireland.
A study by Lansdowne Market Research on a nationwide sample of SSIA holders suggests that just 7 per cent intend to spend the full proceeds of their account. The bank said the figure was in direct contrast with speculation that the economy would be flooded with cash when the scheme ends.
The number of those intending to splurge their five-year savings was also lower than emerged from Bank of Ireland's review of its SSIA customers at the end of last year, which indicated that 17 per cent of savers intended to give up the habit as soon as their SSIA maturity date arrived.
Someone who has contributed the maximum sum of €254 since May 2001 to a fixed rate SSIA with an interest rate of 4 per cent is on target to receive a fund of just over €20,600 after tax.
On that basis, if 7 per cent of the 1.13 million SSIA savers spend all of their funds, up to €1.6 billion would be released into the economy. If 17 per cent of savers were to spend all of their funds, the potential consumer spend would be up to €4 billion.
This does not take into account the 21 per cent of people who indicated that they intended to spend some of their SSIA funds but save the rest.
SSIA policies will begin to mature at the end of May 2006 with the last policies paying out at the end of April 2007. Figures from Bank of Ireland suggest that only 35 per cent of SSIAs will mature next year, as most holders opened their accounts in the months before the scheme's closure in 2002. The full impact of the accounts on consumer spending is thus unlikely to be felt until 2007.
Bank of Ireland said the proportion of its SSIA customers who intended to invest all of their savings after maturity had risen from 11 per cent last year to 21 per cent.
However, almost half - 47 per cent - are still undecided about what they will do with the proceeds of their policies.
Ronan Headon, head of savings at Bank of Ireland, said SSIA holders should seek financial advice before deciding what to do with their funds.
The Revenue Commissioners yesterday issued guidelines for financial institutions about how to handle maturing SSIAs.
SSIA holders will be issued with a form called the SSIA 4 about three months from their projected maturity date. On this form they must sign a declaration that they have not broken certain rules governing the scheme, such as the provision that the person must be resident or ordinarily resident in the State for the duration of the SSIA and that they only hold one account.
Financial institutions will issue a general notice to SSIA holders at the end of the year informing them of the maturity process.
The Revenue said the arrangements were designed to make it as easy as possible for SSIA holders to complete the paperwork and return it to the financial institutions before their maturity date.
