The latest out of the traps is Bank of Ireland, which last week brought out a series of savings and investment accounts that it hopes will accommodate everybody from the conservative saver to the more adventurous investor, as well as the person who hasn’t a clue how they will spend their windfall and just needs a holding account.
BoI’s offerings come with lots of terms and conditions and it is clearly playing catch-up with the likes of the Bank of Scotland, which has already launched a regular saving account with a 3.75% rate for 18 months.
BoI clearly wants its headline product to be the one against which we gauge other post-SSIA equity investment accounts. It promises to keep paying the 25% bonus payment for six months to any of their own customers with an existing equity plan who commit at least half their fund for a further three years and agree to save at least €50 a month.
Spread over 36 months, the top-up is a less flattering 4%, and it is questionable whether this will be sufficiently enticing to make people lock away their money for such a long period.
And then there are the fees. While BoI was not the most expensive equity SSIA on the market when the scheme was launched back in May 2001 — with entry charges of 2.75% and an annual management fee of 1.5% it sat pretty much in midfield — its account was a far cry from the only two investment SSIAs that achieved the Consumer Association’s hallmark of quality for no entry charges and no more than a 1.5% annual management fee.
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Neither Quinn Life nor the EBS had any entry charge and kept their fees to 1% and 1.5% respectively. (Compare that with New Ireland’s 5% entry charge and 1.65% annual management fee, or Acorn Life’s management fee of nearly 2%.) It will be worth watching to see whether other equity fund SSIA providers match such an offer but with lower charges.
The impact of fees and charges is significant on all SSIA investment funds, and while fund performance has been excellent for people who took out these accounts towards the end of the sign-up deadline in May 2002, not all the returns that have been quoted include the charges.
Investment performance at Bank of Ireland Asset Management (BIAM) and sister firm New Ireland over the past 12 months has hardly been stellar. On pension performance, BIAM lags the market leader, on a 12-month basis, by a full 5.9%. Only New Ireland performed worse.
Anybody who is interested in continuing to invest their SSIA fund should keep it simple and look for the lowest cost fund with the best performing fund manager. Failing that, shift your money into a cheap, passively managed index fund or exchange-traded funds (ETF).
There is no need for anybody whose account matures in the spring to rush into any investment option, certainly not until all the institutions show their hands.
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Landlords come under scrutiny
Property investors who haven’t registered with the Private Residential Tenancies Board could forfeit their mortgage relief under rules introduced in the finance bill.
This is one of the smaller anti-tax avoidance apples that the bill is scraping out of the barrel this year, along with changes to the way exit tax is paid on life assurance.
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Organisations such as Threshold, the housing agency, have been complaining for years that many landlords still fail to issue rent books, let alone proper leases, and threaten with eviction tenants who look for registration details so that they can claim their private rental tax relief.
Once this bill is passed, the all-important tax relief on mortgage payments, insurance, maintenance, rates and charges that landlords can claim against their rental stream will dry up if they are not registered.
We can only assume, if the minister has gone to the trouble of legislating to this effect, that the Revenue will make the resources available to check the name on the tax relief claim with the landlords’ register and, if it is a new registration, that they check whether or not the landlord has been in the rent game for longer than just 2006.
If the rest of us are going to have our names and addresses revealed to the Revenue for simply keeping a few euro in a deposit account — another new finance bill proposal — it seems only right that property investors who have been raking in huge tax subsidies for the past decade should come under the same sort of scrutiny.