Podcast: What is the new investment account scheme?

Ireland’s new personal investment account is designed to move more household savings out of cash accounts and into investments such as bonds and shares.

The state-backed scheme will include a tax-free threshold and is expected to begin operating early next year. The Government plans to publish the finer details on 6 October, Budget Day.

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We save €1 in every €8 that we earn, we're better than our European counterparts … but what we’re very poor at is how we save.

Financial planner Eoin McGee told RTÉ’s Behind the Story that Irish households save heavily, but often keep their wealth in forms that may lose value against inflation. “We save €1 in every €8 that we earn, we're better than our European counterparts … but what we’re very poor at is how we save,” he said.

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We carry about 38% of our wealth in cash, bank accounts, credit union, An Post, that type of thing.

McGee said around 38% of Irish wealth is held in cash, including bank accounts, credit unions and An Post. Over a long period, he said, those savings may not keep pace with inflation, reducing people’s purchasing power.

He welcomed the proposed account but advised caution. Although the scheme is expected to have no lock-in period, McGee said people should avoid putting money into it if they might need it quickly. “Don’t put money into this thing that you think you might need in the first five years,” he said. He expects investments left for five years or more to stand above their starting value in normal circumstances, while saying he will await the detailed rules on Budget Day.

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Don’t put money into this thing that you think you might need in the first five years.