Special Investment Accounts limits announced in Budget

[daheff]

One narrative i've noticed yesterday was some commentators talking about provider account fees. Personally I feel there should be no fees from providers who provide such accounts. most ISAs/Swedish savings providers don't charge account fees, they make their money from investments in these accounts.


One to watch to push back on these fleecing fees being taken as granted.




But 100% any gains over €50k should be withdrawn and invested elsewhere immediately. Why pay 1% deemed disposal on the investment if you could (theoretically) invest the same money outside the fund and pay a lower tax amount?

 

[Djimi Traore]

Haha. If history is anything to go by we will still be talking about the 12k a year in 20 years.

Surprised they didn't make it €12,700 to link it to the Punt

 

[Duddaa]

Now the initial reveal has happened, on to the next speculation!! Be interesting now to see the fees and what will be on offer (funds etc) from providers. Will we see a low fee entrant early on or will most land at the same level/offering and watch competition take a few years to happen.

Good question. I'd expect companies like Revolut who've declared they'd offer this to be competitive. Not so sure or confident on others.

If most people have funds below the €50k then the company managing the fund doesn't have to work out and pay the tax. You might have a fee of x for accounts below €50k and a higher fee above where tax has to be calculated and paid.

 

[ronaldo]

I suspect Revolut may have this as a fee free addon for their premium plans and to have trading fees on their free plan.

 

[Zion2022]

same money outside the fund and pay a lower tax amount?

Which tax regime can we use which is better than 1% flat tax? The only better strategy is CGT but dying to write off the bill.
Not that appealing to me.

 

[Connard]

Now the initial reveal has happened, on to the next speculation!! Be interesting now to see the fees and what will be on offer (funds etc) from providers. Will we see a low fee entrant early on or will most land at the same level/offering and watch competition take a few years to happen.

I imagine the likes of Trading212, LightYear etc will offer it for free or low fees. Hopefully, companies start announcing their plans soon for what they will charge.

 

[Connard]

Yes he has done alot in the last year even just to shift the sclerotic narrative in this country on investing, its a major item on the news agenda which it never was before. Its hard to believe its only a year ago that pascal donohue delivered that budget that gave no reliefs to income tax payers in an era of high inflation and when he had a budget surplus. That was a contributing factor to the anger earlier this year with the fuel protests and the government have definitely changed tact significantly this year.

I heard barra roantree on newstalk yesterday with his usual schtik that these new investment accounts were tax breaks for the wealthy and he cherry picked aspects of it to paint it in that light. However he faced strong pushback from susan culliton of newstalk business who was also on who made the point that investors will lose out if stock markets fall and people still have to pay the 1% tax on falling investments. He wasn't too happy and kept interrupting her. He wasn't expecting it either as he is used to lecturing without debate and pushback when he is wrong.

It is good to see this being pushed back against in the media. Hopefully other outlets do the same. If this account is seen as a good thing and not just a tax break for the rich then maybe there will be momentum to increase the annual limit.

 

[Jerome]

Interactive Brokers provide the Swedish equivalent, so it should be very straight forward for them to make the minor adjustments to support Ireland.

There's 5.5M people living in Ireland now, and we have a significant amount of savings in this country with a high GDP per capita. There's a large number of fintech firms out there, who are all aggressively competing amongst each other to gather assets. I'd be very surprised that a country like ours will be ignored and we will be stuck with incumbent banks offering high cost products with limited investment options.

 

[Bronte]

Having read this entire thread and became thoroughly confused I set off to find out what you are all talking about

https://www.independent.ie/irish-news/how-the-new-personal-investment-fund-will-work-and-what-you-can-put-in-each-year/a/162655833.html

- you put in 1K a month or 12K annually, for 4 years = 48K
- you put it into a fund?
- if the amount in the fund goes over 50K you pay 1% on the amount over

This is what is putting me off even thinking about it, firstly I'd be taking money out of a bank account to do this (in red is copy paste from the Weston article)

- it's a 'fund'

investors will be able to build up a €50,000 tax-free fund. However, this does not take account of fees and charges levied by providers.
- no thanks, don't like the sound of that, and the word 'providers' make my eyes glaze over

the fund managers, bank or credit union offering the fund will be responsible for calculating, reporting and paying any tax due to Revenue on behalf of investors.
- no thanks, that sounds very complicated and no doubt I'd be on the hook if they get that wrong ....

savers will be able to invest in shares, bonds and exchange traded funds (ETFs)

- OMG, hate shares, and this will put off anyone who ever went near Eircom (from which I made money), don't understand bonds and EFT's etc are often discussed on here, cannot follow those at all ....

they will not be able to use the accounts to put money into risky products such as crypto assets and derivatives.

- and that's supposed to make me feel better than investing in shares/bonds/EFT's - LOL

people will not be able to hold cash in the accounts.

- actually I thought that was what it was about, so that will be a no from me then, the government think people will take money out of deposit accounts for this?

The tax structure of the new accounts will replace the current 38pc exit tax and eliminate the “deemed disposal” rule for all assets held within the accounts. Deemed disposal is a tax on unrealised gains every eight years.

- Huh, is this good, no idea, sounds good ........ you guys have been discussing deemed disposal for tax purposes for ages, it sounded very complex and was not based on an actual disposal, so not sure how this is a benefit to the people they want to put money into this thing

Some experts have warned that fees charged by investment firms to handle the personal investment accounts may wipe out some of the expected gains.

- Seriously - lol - so it will give "providers" (the money boys) money out of savers savings, no thanks ........

Experts said the new scheme should not be confused with the old Special Savings

- so it is confusing to ordinary people

crucially, the new personal investment accounts will not have a similar €1-in-every-€4 incentive, which made the SSIAs hugely attractive.

- oh right, no benefit then, only downsides

Please tell me I've got this 'savings thing' entirely wrong?

 

[Innisfree]

Interactive Brokers provide the Swedish equivalent

And there is info about this at https://www.interactivebrokers.ie/en/accounts/isk-accounts.php

They seem to be clear that there are no extra fees associated with this, stating:

• Brokerage commissions from 0.05%
• Zero custody fees
• Zero transfer fees
• Zero account maintenance fees

I expect other fintech providers will do the same.
Insurance company fund offerings already handle taxes for consumers today - so quite likely they will just do the same thing for this, and charge a similar AMF...

 

[NotMyRealName]

Please tell me I've got this 'savings thing' entirely wrong?

Well I'm not sure about ENTIRELY wrong.......but you're 100% wrong about EFTs

Electronic Fund Transfer (EFT)

Exchange Traded Fund (ETF)

 

[Protocol]

investors will be able to build up a €50,000 tax-free fund. However, this does not take account of fees and charges levied by providers.
- no thanks, don't like the sound of that, and the word 'providers' make my eyes glaze over

the fund managers, bank or credit union offering the fund will be responsible for calculating, reporting and paying any tax due to Revenue on behalf of investors.
- no thanks, that sounds very complicated and no doubt I'd be on the hook if they get that wrong ....

savers will be able to invest in shares, bonds and exchange traded funds (ETFs)

- OMG, hate shares, and this will put off anyone who ever went near Eircom (from which I made money), don't understand bonds and EFT's etc are often discussed on here, cannot follow those at all ....

they will not be able to use the accounts to put money into risky products such as crypto assets and derivatives.

- and that's supposed to make me feel better than investing in shares/bonds/EFT's - LOL

people will not be able to hold cash in the accounts.

- actually I thought that was what it was about, so that will be a no from me then, the government think people will take money out of deposit accounts for this?

I will keep it simple.

The whole point of this new scheme is to encourage people to hold less on deposit, and to move/transfer those deposits into other financial assets.

The scheme does this by reducing and simplifying the taxation on other financial assets, which at the moment is often complicated, or too high (e.g. 38% exit tax)

It is clear from your post that you have no interest in any financial asset other than cash deposits, therefore this scheme is not for you.

 

[Duke of Marmalade]

Having read this entire thread and became thoroughly confused I set off to find out what you are all talking about

I will take some of the blame for this and so I will address each of your points.

investors will be able to build up a €50,000 tax-free fund. However, this does not take account of fees and charges levied by providers.
- no thanks, don't like the sound of that, and the word 'providers' make my eyes glaze over

This is the most valid point in the article. Typical saving products in the Irish market currently charge around 1.5% p.a. That would kill it for me. But as other contributors have pointed out the Swedish model has led to the new kids on the block providing very low cost access to Exchange Traded Funds. I myself will probably go for an ETF that tracks some stockmarket index. You don't really need to understand it all. But as another contributor has observed this product is probably not suitable for you as it will have its ups and downs. It is not a bank deposit.

the fund managers, bank or credit union offering the fund will be responsible for calculating, reporting and paying any tax due to Revenue on behalf of investors.
- no thanks, that sounds very complicated and no doubt I'd be on the hook if they get that wrong ....

The whole point is that the tax compliance will be completely invisible to you. In fact whilst your fund is less than €50k there is no taxation.

savers will be able to invest in shares, bonds and exchange traded funds (ETFs)

- OMG, hate shares, and this will put off anyone who ever went near Eircom (from which I made money), don't understand bonds and EFT's etc are often discussed on here, cannot follow those at all ....

Forget about individual shares. ETFs are shares that are themselves a "fund" holding many shares. There is stacks of stuff on ETFs on AskAboutMoney.

they will not be able to use the accounts to put money into risky products such as crypto assets and derivatives.

- and that's supposed to make me feel better than investing in shares/bonds/EFT's - LOL

Not sure what you are getting at here.

people will not be able to hold cash in the accounts.

- actually I thought that was what it was about, so that will be a no from me then, the government think people will take money out of deposit accounts for this?

No, unlike similar schemes in other countries this was specifically intended to encourage folk to move their savings into better earning assets than deposits.

The tax structure of the new accounts will replace the current 38pc exit tax and eliminate the “deemed disposal” rule for all assets held within the accounts. Deemed disposal is a tax on unrealised gains every eight years.

- Huh, is this good, no idea, sounds good ........ you guys have been discussing deemed disposal for tax purposes for ages, it sounded very complex and was not based on an actual disposal, so not sure how this is a benefit to the people they want to put money into this thing

This is a red herring and shouldn't have been included in an article on the PIA.

Some experts have warned that fees charged by investment firms to handle the personal investment accounts may wipe out some of the expected gains.

- Seriously - lol - so it will give "providers" (the money boys) money out of savers savings, no thanks ........

Back to the first and main point.

Experts said the new scheme should not be confused with the old Special Savings

- so it is confusing to ordinary people

crucially, the new personal investment accounts will not have a similar €1-in-every-€4 incentive, which made the SSIAs hugely attractive.

- oh right, no benefit then, only downsides

Another red herring.

 

[Zion2022]

have no interest in any financial asset other than cash deposits

Hopefully the financial literacy strategy is effective. We’ve a long way to go!

 

[Bronte]

Well I'm not sure about ENTIRELY wrong.......but you're 100% wrong about EFTs

Electronic Fund Transfer (EFT)

Exchange Traded Fund (ETF)

After I wrote that I rang my money sibling, the “fund” ie my savings, can be entirely wiped out. I’ll stick with those bets for the Grand National.

I use Wise for my currency transfers, and I guess I use EFT from my Irish bank to my foreign bank here, or to pay bills.

ETF’s - is that shares being traded, bought and sold?

Is this scheme not designed to get Irish people with savings in their bank accounts to start investing in stocks, to get that “dead” money moving? To generate “growth” and “stimulate” the economy?

 

[Bronte]

I will keep it simple.

Thank you.

The whole point of this new scheme is to encourage people to hold less on deposit, and to move/transfer those deposits into other financial assets.

The scheme does this by reducing and simplifying the taxation on other financial assets, which at the moment is often complicated, or too high (e.g. 38% exit tax)

Ok, this bit I get, now.

BUT it's not the tax makes people keep money on deposit. It's the risk.

Normally you don't pay tax if you don't make any money. Sure there's DIRT tax on savings, most people don't even see that, because they are earning so little, so they don't even think about it. But you can be damn well sure they will focus on the actual possibility of losing their savings (even if currently losing slowly thru inflation)

Money sibling said it was to make us like the American's, because we've lost out so much compared to them. To which I said Ireland is a very rich country ....

It is clear from your post that you have no interest in any financial asset other than cash deposits, therefore this scheme is not for you.

Agreed, money sibling said the same. That this is not for me, in any case non residents cannot get it. But you're actually wrong, as I have assets other than cash. (pension and property).

 

[Victor Carrera]

ETF’s - is that shares being traded, bought and sold?

I recommend you start with honest.ie. It has everything you need to know about ETFs and more from an Irish tax resident's perspective.

 

[Victor Carrera]

Ireland is a very rich country

You may be confusing rich country with high wage economy.

 

[Bronte]

No

You may be confusing rich country with high wage economy.

By any marker Ireland is now a wealthy country, far better then when I left for economic reasons. America is a rich country, with an unreal amount of very poor people.

This budget, which is, as usual, a tax bribe for votes, is not securing the future of the Irish economy. And I don’t see this scheme unlocking people’s deposits ….

 

[johncb]

And I don’t see this scheme unlocking people’s deposits

Does it have to?

I've heard quite a lot of comments like this, suggesting the new accounts will be a failure because it won't shift all those deposits to investment accounts. But that's not the point - it's to give people an option to do so if they wish.

These accounts are definitely not for everyone.