Time for the Government to deliver a better deal for Irish savers

irishtimes.com · Mar 2, 2026 · Collected from GDELT

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The plan by Minister for Finance Simon Harris to reform the savings and investment regime in Ireland is long overdue. While a proposed European initiative for a new tax-advantageous savings and investment account (SIA) still needs to be worked out, there is a compelling need to incentivise Irish consumers to move money from low-yield deposits into productive investments. Even with the cost-of-living challenges being faced, many households here have some capacity to save, and the current regime isn’t set up to help them thrive financially. Research from the Banking and Payments Federation Ireland (BPFI) shows that less than half of Irish adults hold any type of investment product, thereby missing out on a valuable opportunity to boost their personal wealth. While it’s positive that three in four adults have a savings account, the poor take-up of investment products means many people here are simply not realising the full benefit of investment options – a point which the Central Bank of Ireland has made in recent months. There’s a high cost to this investment apathy. The average annual return on the FTSE All-World Index – which measures the market performance of large and mid-capitalisation stocks of companies located around the world – has been 12.5 per cent annually over the past five years. By contrast, the average interest rate on new household term deposits is 1.86 per cent, according to the latest figures from the Central Bank.This is very low and the result is that Irish households are effectively watching wealth accumulate elsewhere, while their own savings stagnate.Why is this the case? The answers are complex, but the tax and regulatory system play a central role. The 2026 pre-budget submission from Insurance Ireland laid out a compelling blueprint.It called for equalising the taxation of financial products with similar objectives, effectively aligning the tax treatment of life assurance exit tax, capital gains tax and deposit interest retention tax (Dirt). Insurance Ireland also proposed the removal of the 1 per cent life assurance levy, a charge which discourages investment. If we want to encourage people to save and invest wisely, the Government needs to put everyone on an equal footing. Moving quickly to align tax on all savings products at 33 per cent and removing the 1 per cent levy would be a simple, fair change and make investment products much easier to understand.Irish households have historically been risk-averse, shaped by the financial crises of the past, when many people invested directly in equities and in many cases lost substantial sums. The BPFI research shows that most Irish investors are conservative, and a recent Central Bank report shows that a significant proportion admit that they do not fully understand the costs associated with their investments or how they work. The result is a population that under-invests relative to capacity and risk appetite. By contrast, households in the US and UK, operating under simpler tax regimes have seen markedly higher returns over the same period.As well as tax equalisation on the current savings products, the new SIA should be introduced to include simple, transparent and tax-free incentives. Consumers would benefit from this kind of simple, tax-efficient option, similar to what is available in other countries, such as the UK’s Individual Savings Accounts (ISAs). ISAs are essentially savings accounts that allow people to save up to £20,000 a year tax-free. They were introduced in 1999 giving people the option to save their money in stocks and shares – as well as in ordinary deposits. Such a wrapper could offer greater clarity and appeal than the current patchwork of tax treatments, levies and exemptions. The success of the Special Savings Incentive Scheme (SSIAs) in Ireland in the early noughties shows that the demand for easy-to-understand Government-backed savings accounts is there. Investment reform must also address the underlying complexity and opacity of Ireland’s tax and investment system. Until households can clearly understand the incentives and consequences of investing, uptake will remain low. This is a challenge not only for regulators and policymakers but also for the financial services industry, which must communicate in plain language, provide transparent pricing and build trust with potential investors.The benefits of investment reforms are clear. Households would have greater freedom to invest as little or as much as they choose, with clarity on taxation and fees. For individuals, the difference between holding cash and investing in equities over the long term can mean the difference between a modest retirement and a financially secure one. For younger adults, early engagement with investment markets allows the power of compounding to work over decades. Overall, customers become more engaged in their financial situation. And the economy as a whole would benefit from increased domestic investment, supporting capital markets and productivity growth.Downside risks exist, of course, but over the long term, equity markets have historically outperformed cash deposits. At present, savers in Ireland hold close to €170 billion in deposit accounts, earning next to nothing. Ireland has an opportunity to quickly simplify the taxes applied to current savings products and to design a modern SIA that is open to all consumers. Doing so, provides clear incentives to move money from low-yield deposits into productive investment. If the Government wants Irish households not just to save, but to thrive financially by investing in equity markets over the medium to long term, a well-thought-out SIA and bold investment reform – rather than modest tinkering – will be required.Noel Freeley is chief executive of Royal London Ireland