Help, I have a SSIA, what do I need to do now?

Special Savings Incentive Accounts or SSIAs are a five-year savings scheme in which the Government tops up, by way of a tax credit, subscriptions made by an individual to his or her SSIA.

For example, if you lodge €100 each month to your SSIA with your financial institution, you are entitled to receive €25 each month by way of a tax credit from the Government.

Your financial institution claims this credit on your behalf and lodges it to you SSIA each month.

SSIAs, which were opened in the period 1 May 2001 to 30 April 2002, will mature during the period 31 May 2006 to 30 April 2007.

During 2006 and 2007, depending on when the SSIA was opened, a form SSIA4 will be required to be completed, signed and sent by each SSIA holder, to his or her financial institution.

Each financial institution will, at the appropriate time, supply an SSIA4 to each of their SSIA holders for completion and return to them. For example SSIAs that were started in May 2001, will mature on the 31 May 2006. The SSIA4 in these cases must be completed and returned to the financial institution in the period 1 March 2006 to 31 May 2006. 

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Your options fall into four categories:

- leave it in the account to continue growth subject to normal tax rules.

- transfer the capital sum to your pension fund with full tax relief.

- use the capital to seed an investment in assets such as property.

- acquire a long desired product or service such as car or holiday. 

All have tax implications and should be ranked on their merits.

For example, if you commenced your SSIA in March 2002, the maturity date is 31st March 2007. You will be required to complete and sign and return an SSIA4 declaration to your financial institution between 1 January 2007 and 31 March 2007.

The 2006 Finance Bill was published on Thursday 2 February 2006. Section 40 of the Bill, when enacted, will provide an incentive for certain SSIA holders to reinvest all or part of their net SSIA proceeds after maturity into an approved pension product.This note is a preliminary outline of how the provisions of the Bill relating to the incentive would operate. Any change to those provisions during enactment will be reflected in a more detailed note that will issue following enactment.

In order to be eligible to avail of the incentive, an SSIA holder must satisfy the following conditions:

• the SSIA holder's gross income (i.e. before all deductions) in the year before the year in which his/her SSIA matures, cannot exceed €50,000*;
• none of that income can be chargeable to tax at the higher rate (viz. 42%)*;
• a normal income tax deduction cannot be claimed in respect of the amount of the SSIA proceeds that are reinvested in the pension product; and
• since this incentive is for the purpose of increasing investment in pensions, the SSIA holder cannot reduce any amounts that heishe is already required to pay into a pension product in the year the SSIA proceeds are reinvested in a pension product.

*For the purposes of the gross income condition and the tax rate condition, each member of a married couple is to be considered, as if they were separately assessed.

The incentive is twofold:

1. for every €3 of SSIA proceeds reinvested by an eligible SSIA holder in a pension product, the government will contribute €1 by way of a tax credit up to a maximum of €2,500.
2. the government will contribute an additional tax credit to the pension product. This additional tax credit will be a percentage of the tax deducted from the SSIA on maturity. If the SSIA holder reinvests all (100%) of his or her SSlA proceeds then the additional credit will be all (100%) of the tax so deducted. If he or she reinvests one half (50%) of the SSIA proceeds in a pension product then the additional tax credit will be one half (50%) of the tax so deducted - and so on.

The SSIA proceeds can be reinvested:

• as an additional voluntary contribution to an occupational pension scheme;
• as a contribution to a Standard Personal Retirement Savings Account; or
• as a premium under a retirement annuity contract.

The earliest SSIAs will mature at the end of May 2006. This incentive will, therefore, begin to be available from June 2006. An eligible SSIA holder will have three-months from the maturity date of his or her SSIA to reinvest some or all of the SSIA proceeds in a pension product in order to avail of the incentive.

For example, where an SSIA matures on 31 May 2006, the SSIA holder has until Thursday 31 August 2006 to reinvest some or all or his or her SSIA proceeds

Right now, an SSIA holder has to do nothing as regards this pension incentive scheme. Once the Finance Bill is enacted full details of how the scheme will operate will be made available. At this stage it is envisaged that an eligible SSIA holder will request his or her SSIA provider (bank, building society etc.) to furnish a "maturity statement" when his or her SSIA matures - see below. Within 3 months of the maturity date, the SSIA holder, furnishes a pension provider with the maturity statement, invests some or all of his or her SSIA proceeds in a pension product and makes a declaration to the pension provider. After the "cooling off period" (if any) in respect of this investment in the pension product, the pension provider will apply to the Revenue for the relevant tax credit and additional tax credit in a similar fashion to SSIA credits. The tax credits will be forwarded by Revenue to the pension provider who will then add those funds to the pension product.

The Maturity Statement, which must be provided by the SSIA manager on request of an SSIA holder, will contain the following:

• name/address/PPS number of SSIA
  holder and name/address of QSM;
• date of maturity;
• gross funds at maturity;
• net funds (after matuirty tax deducted);
• amount of tax on maturity.