Household savings rate rises largely driven by investment in homes

Next month, the Government will release details of its new personal investment accounts. 

The savings rate of Irish households between April and June increased 19.9% with €1 in every €5 of disposable income going into savings, new data from the Central Statistics Office (CSO) shows.

The savings rate is up from the 19.1% recorded during the first quarter of the year and above the quarterly average rate of 18.7% since the start of 2023.

In the year to the end of June, Irish households saved €39bn with disposable income of €198bn and consumption of €159bn. Since the end of March, household disposable incomes increased by 3% faster than the 2.1% increase in household consumption.

Saving can add to a household's overall wealth in the form of buying new homes, growing bank deposits, pension savings, and paying off debt.

During the second quarter households saved €11.2bn. Investment in dwellings and improvements accounted for over €6bn. Additions to pension funds stood at €1bn.

Between April and June, household spending on goods and services reached €41bn. When the effect of price changes is also removed, the volume of consumption increased by 1.0%.

In that time, total disposable income of households was €52.3bn. Employee wages contributed €43.4bn to overall household disposable income.

In addition to wages, total disposable income also includes other income such as self-employed earnings, interest and dividends received and social benefits, but is after deduction of income taxes, social contributions and interest paid.

Government personal investment accounts

This latest savings data comes ahead of the introduction of the Government’s new personal investment accounts which is aimed at encouraging people to move their savings into other investment vehicles such as bonds and shares.

Savers will not be allowed to put money into crypto or other “risky” products.

The new investment account will be available to Irish tax-resident individuals aged 18 and over who hold a PPSN, with one account permitted per person. The account will have a tax-free threshold, with a low flat rate of tax applying annually to the value of the account above that threshold.

Where the value of the account is below this threshold no tax will be due.

Account holders will not have to invest a certain amount each year, but an annual maximum contribution limit will apply. Savers will not be allowed to put money into crypto or other “risky” products.

Further details of the accounts will be published as part of the budget next month.

Managing director of financial planners WealthPlan, Bryan Harvey, said despite being a “nation of savers” Irish people “often fall short when it comes to making their money work as hard as it could”.

“Many Irish people have their savings sitting in low-interest deposit accounts which yield little if anything by way of return. This means that many are actually losing money by letting their hard-earned cash sit in low-interest deposit accounts.

“The Government’s planned personal investment accounts could give Irish households a valuable opportunity to invest their money and enjoy better returns than they have ever seen on deposit.”