Only 270,000 savers have opened accounts under the Government Special Savings Investment Scheme introduced in May. Under the scheme, announced in the February Finance Bill, the Government agreed to give savers £1 for every £4 they save each month over a five year savings term.
By the end of September just under £40 million (€50.8 million) was invested in the accounts, according to figures from the Department of Finance. Despite the 25 per cent Government bonus, savers have been slow to open accounts. Before the scheme's introduction an AIB survey indicated that about 70 per cent of the 1.7 million people in paid employment were likely to open accounts. While savers were given a full year to open accounts - the deadline for opening accounts is April 30th 2002 - less than 23 per cent of this potential customer-base has so far started savings plans. Some sources now expect that only about 40 per cent of the employed population, or about 680,000 people, will open accounts by the April deadline.
Industry sources report some increase in the take-up of accounts in October but most banks and insurers were reluctant to disclose their own figures describing them as "commercially sensitive". The Department figures for October will not be available until the end of next month.
Most financial institutions offering savings and investment options under the scheme now expect a fairly sharp pick-up in demand in the early months of 2002 as the deadline approaches. Some institutions are confident that some funds returned to investors from the sale of Eircom to the Valentia consortium could make their way into special savings accounts.
Eircom retail shareholders are expected to get back about €600 million (£472 million) on completion of the sale. While many of the shareholders who have lost about one-third of the original sum invested in Eircom may decide to spend their payback, some may opt to lodge the refund in a deposit accounts and feed it through in monthly instalments into an SSIA. Another potential source of new SSIA business could be the people who declare bogus non-resident bank accounts by the November 15th amnesty deadline and pay their tax bills to the Revenue.
Hibernian had taken in £13.5 million in annual premiums under the SSIA scheme up to the end of September, according to marketing manager Mr Ian Veitch. "There has been a steady take-up. September was a poor month but there was a good pick-up over the last few weeks. Concern about the economic slowdown may have caused some more caution about committing to longer term investment plans but we are seeing a pick-up which we expect to continue up to the deadline," he said.
Hibernian said the average monthly amount saved was £180 to £190 - close to the maxiumum level permitted of £200 - and about half of savers are opting for the more aggressive equity based funds.
AIB said that while the take-up has been slower than expected it was happy with its market share. It declined to disclose the amount invested but said 38 per cent of the funds invested went into equities with the balance into deposits of which 70 per cent went into fixed interest rate accounts.
EBS building society said that after a high inflow over the first six weeks of the scheme the pace of inflows has steadied.
"We do not anticipate any major increase in the run-up to Christmas as customers focus on their Christmas budgets. But from January we are likely to see a concentrated period of activity right up to the closing date in April," according to Mr Pat Farrell. He forecast that about £750 million would be lodged in SSIAs across all institutions by the time the scheme closes.
