Danny McCoy: A cultural shift is needed to change Irish savings into productive capital
Ireland must design public policy in a way that promotes the development of a broad-based culture of investment and wealth-building, says Ibec chief executive Danny McCoy
Ireland has no shortage of domestic household savers, but what it lacks is domestic investors. Households have built up record bank deposits - €167bn at last count - yet very little of those savings are put to work in equities or investment funds.
According to Eurostat, Irish families hold just 19% of national income in these assets, compared to more than 150% in Sweden and Denmark.
This reluctance to invest not only short changes Irish households on long-term wealth building, but it also leaves the country struggling to tap into the private capital it needs to tackle housing, energy, and enterprise challenges. It is time to stop treating saving as an end itself and start building a culture of investment.
A better strategy for Ireland is to design public policy in a way that promotes the development of a broad-based culture of investment and wealth-building. It was widely reported during the pandemic that Irish household savings, overwhelmingly in bank deposits, soared due to government supports and lockdown restrictions that limited spending. What is less commented on is that since the end of the pandemic, bank deposit growth has continued.
According to another analysis by the Central Bank, deposits in Irish banks increased by over €500m per month between June 2022 and December 2024. By end-July this year, in addition to Irish households holding the €167bn bank deposits, households’ net wealth position was estimated to be over €1.2 trillion. Household debt, whilst much commented upon, is relatively low at €163bn and, remarkably, lower than bank deposits.
Whilst 10% of households own 50% of the wealth, this is still substantially more equitable than European norms. An investment culture would enhance societal equity in Ireland.
The problem is not simply that households’ deposits are idle, but that they are steadily losing value in real terms. With inflation still above the long-term ECB target and deposit rates barely keeping pace, the purchasing power of Irish household wealth is quietly eroding.
In other countries, households turn to capital markets to preserve and grow their wealth. Here, by contrast, risk aversion and policy distortions combine to keep most savings locked away in accounts that generate little return. A genuine cultural shift is needed - one that normalises long-term investing as a responsible way of building resilience, not just for families but for the wider economy.
Financial literacy campaigns, automatic enrolment in retirement investment schemes, and reforms to simplify access to diversified products can all help push savers towards more productive choices.
To achieve improved financial outcomes for households, and better harness the power of the private sector to fund infrastructure and scale businesses, Irish citizens should be encouraged to diversify the ways in which they hold their wealth. Turning our nation of savers into a nation of investors will not only promote sustainable improvements in wealth equality; it will also increase the country’s financial firepower to the benefit of our housing market, our energy system, and our start-ups. To make this happen, the Government must push for policy change both at home and in Europe.
At home, they need to remove tax barriers to capital markets investment. The tax system currently discourages people from investing in Exchange Traded Funds (ETFs) and other investment products – some of the most efficient ways of investing in companies. These funds attract a 41% tax on the growth of their value which must be paid every eight years. By contrast, a capital gains tax of 33% is paid on direct investments in company shares, and only when the asset is sold.
Last year, the Department of Finance published a new policy framework for the funds sector which recommended addressing all these anomalies. Financial Services Ireland, the Ibec group that represents the financial services sector, along with the wider financial sector has been advocating for speedy implementation of the Funds Review recommendations. Budget 2026 is the time for these recommendations to be implemented in full.
The Government should also be a leader on this topic internationally. Every effort should be made to advance the EU Savings and Investment Union – the policy initiative focused on creating a single European market for money. This will involve breaking down barriers between member states’ capital markets, including by removing cross-border withholding taxes on investments, establishing a unified settlement and clearing system, and streamlining and harmonising regulations around everything from disclosure standards to insolvency.
As a small economy with a dynamic private sector, Ireland is particularly affected by these barriers. Irish capital markets are simply not deep enough to efficiently cater to our investment needs. What is more, a shortage of venture capital is starting to constrain our innovative start-ups’ ability to scale, potentially depriving ourselves of the creation of the next Irish multinational.
Irish leadership on this issue in Europe is logical and timely. Despite Ireland’s relatively underdeveloped domestic investment culture, the country is a major hub for the global and European funds industry, with €5.7tn in assets managed or serviced here. As Europe’s second-largest funds domicile, Ireland is uniquely positioned to benefit from deeper and more integrated European capital markets through the Savings and Investment Union.
Finance Minister Paschal Donohoe’s reappointment to a third term as president of the Eurogroup, coupled with Ireland’s upcoming presidency of the European Council in the second half of next year, provide valuable platforms for influence. Yet Ireland’s credibility in pushing for ambitious European reforms will depend on the leadership it demonstrates at home.
Budget Day on October 7 will be the first test of that commitment.
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