Should we have the equivalent the UK ISA (Individual Savings Account)?

[Brendan Burgess]

Babyboomer suggested in the main thread on the principles that there should be an equivalent to the UK Individual Savings Account in Ireland.

In summary, this is how UK ISAs work.
1) You can save up to £20,000 a year in an ISA.
2) The income and capital gains are tax-free
3) You don't need to complete a tax-return

I love the administrative simplicity of this, but £20k a year seems very high. After 10 years, someone could have £200k in a fund which is tax-free.

Another problem is that this is so attractive, people would save through this rather than a pension fund.

Brendan

 

[Brendan Burgess]

On reflection, I think an ISA with a lifetime limit of €50k would be appropriate.

So, once it's more than €50k in value, I can't contribute any more.

If I withdraw €20k to buy a car, I can later bring it back up to €50k.

The UK system really favours people who can put in £20k a year and who don't need to take it out. That seems to unequal as it's too generous to the few who can contribute at that level.

Brendan

 

[Purple]

On reflection, I think an ISA with a lifetime limit of €50k would be appropriate.

So, once it's more than €50k in value, I can't contribute any more.

If I withdraw €20k to buy a car, I can later bring it back up to €50k.

The UK system really favours people who can put in £20k a year and who don't need to take it out. That seems to unequal as it's too generous to the few who can contribute at that level.

Brendan

A lifetime limit of €50k seems very low though. How about a limit set at whatever will buy an annuity that provides the same income as the State pension?

 

[MrEarl]

Hello,

I think a variation of the UK's ISA would be a very good thing - but I'd be looking for a way to incentive those with less, to participate.

Maybe only make it available to those with an income of less than "X" per annum (this could be easily checked, through the tax or social welfare records). If a person later goes above the income threshold, it gets frozen, so can't accept new deposits.

Perhaps offer a bonus for those on low / no incomes, not dissimilar to the bonus paid on the old SSIA accounts (but only to be paid to those who meet the low income criteria).

Like Mr. Burgess, I think it also needs to be keep fairly simple, and would be happy to see people allowed to withdraw funds periodically, and then top back up, to whatever the maximum limit was.

 

[Brendan Burgess]

How about a limit set at whatever will buy an annuity that provides the same income as the State pension?

But we have pension tax reliefs for that?

 

[Purple]

But we have pension tax reliefs for that?

True, but people on low incomes see pensions as locking up their income for too long. In effect this would be like a pension with better access to funds. Of course we could just change the rules for pensions so there is better access to funds. As you've pointed out before owning your own home when you retire is more important than having a private pension. This could be used to pay off a mortgage balance, buy a home, or buy an annuity.

 

[DublinHead54]

Hi Brendan,

If my memory serves correct it was only 3k per year up to a few years ago then they overhauled the system. There are now the new limits plus a stocks and shares isa, cash isa, and at one time there was a first time buyer ISA (matched from government up to x).

It is a great product that certainly taught me the value of saving!

I think it is a great product especially for younger people who have a need for the cash in a few years for house deposits etc. For example, in my 20s I live in the UK and I wanted to prioritize saving for a house deposit over maximizing my pension and the ISA option was great. There is no similar option in Ireland which is a shame, yes we have pension tax reliefs but AVCs don't help save for a deposit. In my opinion and from experience people in their 20s are not interested in AVCs.

Maybe something like the Lifetime ISA https://www.gov.uk/lifetime-isa

You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA.

You can put in up to £4,000 each year, until you’re 50. You must make your first payment into your ISA before you’re 40.

The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.