How will the State's savings & investment account work?

Ireland’s planned savings and investment account will offer consumers a tax incentive to put money into investments rather than leave it in bank deposits that typically pay negligible interest.

Finance Minister Simon Harris has announced only the broad parameters so far. The first returns will be tax-free, according to the Department of Finance, and a low tax rate will apply beyond that. The Government will set the tax-free threshold, the reduced rate and the annual contribution limit in the October 6 Budget.

Individuals will not have to make a minimum contribution, but each person will be limited to one account. Investors must be over 18 and have a Personal Public Service Number. The first accounts are expected to become available in the middle of next year.

The proposed tax treatment is attractive because Irish investors currently pay 33% on gains from shares and 38% on many funds. The scheme is designed to address concerns that discourage people from investing, including the risk of falling share prices, broker fees and the need to assess individual companies.

The accounts could hold listed shares, market bonds, retail investment funds and exchange-traded funds. Funds can spread investments across multiple companies or asset types, reducing exposure to the performance of a single firm. The Government hopes the State-backed structure and tax-free element will encourage more people to invest for the future.