The Minister should be clear about his objectives in any new savings scheme

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Sarenco

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I think it’s important to frame the objective of any incentivised saving product before deciding on the best model for Ireland.

The Tanaiste talked about enabling middle Ireland to build wealth and financial resilience.

I think that’s a laudable objective and should guide the product design.

In particular, I don’t think the product should attempt to incentivise investment in any particular region, security or financial product. Leave that decision to individual savers.

And I think the product needs to be easy to understand - no taxes on interest, dividends or capital gains generated from assets held within the incentivised account. Full stop.

Now that’s a fairly generous concession so there has to be some sort of cap on contributions.

Annual contributions to the Canadian TSFA are capped at the equivalent of around €4,300 (which seems a bit low to me) and annual contributions to an ISA in the UK are capped at the equivalent of roughly €23k (which seems very generous to me).

Maybe an annual contribution limit of €10k would be appropriate here?
 
This is very important and here are some objectives worth considering

It is to move people's long-term savings from deposit products to equity based products where the return should be better.

It should remove inequities in the current taxation system.

It should encourage those who want to invest in equities to invest in a fund rather than directly in individual stocks - or more correctly, it should not favour investment directly in stocks over a diversified fund.

It is not to increase the level of savings as we have a fairly high savings level already.


It is not to be so generous that people will opt for this scheme over making pension contributions.

It is not to create 5,000 ISA millionaires.

It is not to penalise people for whom deposits are suitable e.g. those saving to get on the housing ladder.
 
Brendan Burgess said:
It is not to be so generous that people will opt for this scheme over making pension contributions.
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The problem is, when I previously mentioned a small proportion of people in the UK who choose an ISA over a pension, a significant portion of these are people who completely lack trust in pensions and the governments inability over the years to tinker with rules like minimum age of access and maximum overall fund size. Many in their twenties save their spare cash in an ISA but, were an ISA not available, would simply not bother long-term savings (and the use-it-or-lose it nature of annual contributions is enough of an enticement to avoid withdrawing funds where not absolutely necessary).

Sarenco said:
In particular, I don’t think the product should attempt to incentivise investment in any particular region, security or financial product. Leave that decision to individual savers.
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This is the first foray into an EU-wide initiative and I suspect it may be restricted to European companies or EU-themed funds and ETF's - I actually don't mind it too much were this the case as the EU is a big place, with plenty companies to choose from. It'd be a disaster if they restricted it to Irish companies, small companies, or some other crazy idea (which they're well capable of coming up with).

Sarenco said:
And I think the product needs to be easy to understand - no taxes on interest, dividends or capital gains generated from assets held within the incentivised account. Full stop.
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This is the most important thing and it needs to be structured really well. If EU countries could get their act together and design something properly, a product where you could invest in EU shares AND each country had agreed that no withholding tax applies to dividends, we'd be in a good place. Get rid of all the hassles of crediting withholding tax against overall tax due (of which there'd be none in this product) and the ridiculous current need to reclaim some excess withholding tax back from various countries. If such a product were to ever exist, any contribution limits would likely be set at an EU level as opposed to an Irish level.

In fact, even if they created a product, with an annual contribution limit, where EU countries are all in agreement that withholding tax doesn't apply, they could allow for zero restrictions in investment choice. If one wanted to invest in US companies, they are free to do so - but they need to realise that the US will never give an exemption to their 15% withholding tax on dividends. I suspect the vast majority of funds in such a product would end up in European companies (and, should the US outperform Europe over the coming years and decades, it's not on any EU government that investors may have had inferior returns).
 
It should be to move people's long-term savings from deposit products to any single asset class (or multi-asset class) fund/etf they choose to invest in. Forcing equities on middle Ireland isn't going to work.
 
If there is no need to increase the stock or inflows of savings, then why create a new savings vehicle?

Why not simply try to harmonise the tax treatment of different asset classes?


DIRT is 33% in 2026.

Exit tax / LAET tax on funds was recently cut from 41% to 38%.

Returns from owning shares are taxed at 33% CGT and marginal income tax on dividends.


Maybe just cut LAET on funds to 35%, and leave it?
 
Folks
This thread is clearly about what the objectives of the new scheme should be.

It is not another thread for a general discussion of the issues.

I have deleted all off topic posts.

Brendan
 
Brendan Burgess said:
It is not another thread for a general discussion of the issues.
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Is there a place for posting additional reporting on the topic?

I posted a story relating to a news story that there would be a child saving scheme to follow.

I thought that was related to the clarity or lack of in relation to the scheme’s objectives. Should it have been a new thread?
 
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