Revenue Note for Guidance

PART 36A

Special Savings Incentive Accounts

Overview

Part 36A contains sections 848B to 848U, which set out the provisions governing an incentivised savings scheme for individuals.

This new scheme known as “Special Savings Incentive Accounts” (SSIAs) commenced on the 1st of May 2001 and every eligible person is entitled to start such an account during the following 12 months. The main features of the scheme are as follows —

• every resident person who is aged 18 or over can have an account, but only one account – it will be a criminal offence to have more than one account;
• in the first year of the account the person must save an amount agreed with the managing institution; this amount cannot be less than €12.50, and not more than €254, in any one month;
• after the first year there is no obligation to save a fixed regular amount but in any one month, the amount saved cannot exceed €254;
• the incentive to save, which the scheme provides, is that for every €1 saved in an account, the Exchequer will contribute 25 cent to the account – this is equivalent to giving a tax credit (at the standard rate of income tax for the year of assessment 2001) in respect of the amount saved; this tax credit is forwarded to the managing institution for lodgement into the account;
• special savings incentive accounts are managed on behalf of the individual saver by a range of bodies such as banks, building societies, credit unions and life assurance companies; the manager invests the saver’s lodgements together with the Exchequer tax credit by putting them on deposit, or investing in shares, government securities, units of a unit trust or a life assurance policy;
• it is possible for a saver to transfer his/her account from one manager to another;
• if a savings account runs its full term of 5 years or the account holder dies the account is treated as maturing and only the investment gain will suffer tax, and then at only 23 per cent – in other words the amount saved and the total Exchequer contribution will then belong to the saver tax free;
• if, however, there is a withdrawal from the account, before it has run its full term, the amount withdrawn will suffer tax at 23 per cent;
• some conditions attach to the scheme; e.g. a declaration must be completed on commencing the account to include the individual’s Personal Public Service Number; the individual must be resident in the State for tax purposes, etc; if any such condition is not adhered to, or the account is terminated before it matures, it is treated as ceasing and the total amount in the account will be taxed at 23 per cent.

Further information about this scheme is also available. Leaflet CG12 “Special Savings Incentive Account” and notes for guidance “Guidance notes for qualifying savings managers in relation to the management of Special Savings Incentive Accounts” (revised in August 2001) outline the scheme in detail. Finally, regulations, as provided for in section 848S, came into effect on 1 May 2001 (S.I. No. 176 of 2001).