Minister recalls the SSIA experience as justification for rejecting Colm's proposal

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Duke of Marmalade

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The Minister's reply to the Seanad Debate on the AE bill yesterday was a verbatim repeat (read from script) of her reply to the Dail. Until she added this gem. She recalled the huge success of the SSIA but observed that after the 5 years of that initiative ended the equity based SSIAs had underperformed the deposit versions.
I nearly choked on my evening cocktail giving the duchess an instant cause for alarm.
For heaven's sake the DSP proposal is for the default investment strategy to be in equities until age 51.
The SSIA experience actually underpins Colm's proposal. If equities always outperformed deposits there would be no need for his smoothing approach.
Of course, this little gem did not occur to the Minister over her cornflakes. But I refuse to believe that it came from the PC which has enough actuaries to know better.
No, this nonsensical comparison came from her department who have clearly adopted a bunker mentality in defending the indefensible on several fronts. The problem with that is that a GE induced change in our political masters will not penetrate this bunker.
 
My recollection is that the equity based SSIAs outperformed the deposit versions.
 
Fortune said:
My recollection is that the equity based SSIAs outperformed the deposit versions.
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They did in the end - but not by much.

And if they rolled forward a further 2/3 years, they would definitely have underperformed deposits.
 
Sarenco said:
They did in the end - but not by much.

And if they rolled forward a further 2/3 years, they would definitely have underperformed deposits.
Click to expand...
My parents had two, and my mother's equity SSIA outperformed my father's deposit SSIA. I suppose the performance would depend on the start dates of the investments. Interestingly, there was at least one firm offering smoothed/with profit SSIAs.
 
Fortune said:
My parents had two, and my mother's equity SSIA outperformed my father's deposit SSIA. I suppose the performance would depend on the start dates of the investments. Interestingly, there was at least one firm offering smoothed/with profit SSIAs.
Click to expand...
Your mam likes to take risks, your dad likes to play it safe. Ah well, they say opposites attract. :)
 
IIRC, the SSIAs all matured in 2006/2007. So equities in general would have beaten deposits over those 5-year periods (just about).
 
This is the transcript of the Seanad Debate. Michael McDowell's contribution is well worth a read - I do not recommend the rest of it.
This is what the Minister actually said on SSIAs.
Minister Humphreys in Seanad debate said:
I would like to mention a case I came across during the period of the special savings incentive account, SSIA. It is important to me that everybody is treated equally regardless of whether they decide to go for low-risk, medium-risk or high-risk. During the SSIAs, which were very successful, I saw that some people decided to go for equities and ended up with a return that was much lower than if they had gone for a different savings approach. It may not have worked out or have been there long enough.
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It reads like a personal anecdote so maybe it is one of her own. It remains that this is a really unjustifiable contribution and smacks of that bunker I talked about.
 
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“In essence, a pension is a more profitable scheme than an SSIA, but it is simply conducted over a longer term. The Pensions Board is confident that SSIA holders will realise the importance of long term financial planning and take the necessary action required to continue a positive habit of saving for their futures,” said Mary Hutch.

The Pensions Board calls on SSIA account holders to invest in their pensions - pensionsauthority

Monday 24 July 2006: The Pensions Board has today called on SSIA holders to consider investing in their pensions when their accounts come to fruition. The Board is highlighting the tax incentives in contributing to a pension. The CSO Quarterly National Household Survey 2005, highlighted that in...
pensionsauthority.ie pensionsauthority.ie
 
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