New savings schemes should be simple and tax-free for young adults, says think tank

The plans have drawn comparisons with the Celtic Tiger-era SSIA scheme. File picture

Government-backed investment accounts should be made as simple as possible for the public to access, while tax-free products should be made available to 18–25-year-olds, a new report has claimed.

Delving into options for personal investment accounts in Ireland, the think tank Institute for International and European Affairs (IIEA) said public understanding will be a key factor in ensuring take-up when the schemes are expected to launch in 2027.

“Giving Irish consumers increased options for their savings other than low interest bank deposits stands to be a win-win: they protect and grow their wealth while more capital is channelled to Irish businesses,” report co-author and IIEA chief economist Dan O’Brien said.

In the next Budget this autumn, Tánaiste Simon Harris is expected to announce a new Personal Investment Account, which he has said he wants to make attractive for people to invest in while also delivering returns on small investments.

“There are examples of grannies, parents, individuals [saving money] right across the country,” he said.

“But at the moment, despite people doing the right thing, that's not earning any money. It'll be worth less to those grandkids when they go to withdraw it than it is when they put it in. That’s what we’re trying to fix.” 

The plans have drawn comparisons with the Celtic Tiger-era SSIA scheme, but the IIEA said findings from a roundtable it convened suggested any new product should not necessarily be modelled on it.

“Participants in the roundtable deemed the SSIA a successful endeavour due to the mass engagement from the public with individuals knowing ‘what was in it for them’,” the report said. “However, it was noted that the cliff-edge nature of the product was a drawback.” 

The report pointed to schemes in the UK and Sweden as potential templates and stressed that incentives must form part of any such scheme in Ireland.

It also said the Eircom shares experience, where many shareholders lost out significantly, still “looms over a generation” and discourages long-term investment.

Stakeholders at the roundtable suggested negative perceptions of investing need to be addressed across the industry.

The IIEA recommended there is no need to build a system from scratch and said simplicity should be central to any new product.

“To increase the levels of adoption with the general public, products should be as simple as possible, with minimal restrictions on access,” it said.

“This means that the minimum age to access a product should be 18, as it is in other models, and that there should be no minimum investment requirements for the majority of products. Portability is also important, and investors must be able to move their accounts between providers easily and with minimal cost, if any.” 

It also suggested offering a range of products to attract different types of investors, including options aimed at younger people, and taxing them at source to reduce administrative burden for consumers.