The tax-efficient personal savings and investment accounts (SIAs) planned by the Government may attract as much as €7 billion of investment from Irish households in its first year, according to Banking and Payments Federation Ireland (BPFI).

The industry body carried out an analysis of what portion of the €170 billion of Irish household deposits in banks may end up being redirected towards SIAs in a report published on Wednesday, May 13th, as it met Minister for Finance Simon Harris and his officials to discuss the proposal.

After stripping out deposits held in longer-term accounts, savings of sole traders and certain small businesses that are categorised by the Central Bank as household deposits, and an estimated 40 per cent of balances held by customers over 65 years of age, BPFI said €20 billion-€30 billion could potentially be put to work in SIAs.

“Of the estimated addressable market, only a percentage will be invested in an SIA scheme initially, which would then be built up over a period of time,” it said. “We therefore believe that after year one, roughly €2 billion-€7 billion could be invested in an Irish SIA, split across various asset classes.”

Harris said in late March that the planned personal investment account regime will feature an annual flat-rate tax that is likely to be set in the budget later this year. He said this flat-rate tax could potentially serve as the sole form of taxation on investments made through the new account.

The plan is in line with a push by the European Commission for EU member states to adopt tax-friendly models to encourage individuals to invest.

The Oireachtas finance committee has been examining aspects of proposed regime in recent months, stoking debate about the pros and cons.

Two academic economists – Enda Hargaden, assistant professor of economics at University College Dublin, and Barra Roantree, assistant professor of economics at Trinity College Dublin – told committee members last week that it could poke a hole in the tax bucket that will benefit the wealthy at the expense of the State coffers.

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Patricia Callan, director of Ibec’s financial services group, argued on Wednesday that the initiative “has been misrepresented at times as a tax cut for the rich” – noting that it is likely to have an investment cap, which would limit tax-sheltering for those in the high-net-worth category.

“The main goal is to help more people in Ireland become financially resilient through investing,” she said in a prepared statement before meeting members of the committee.

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BPFI said it was important that a scheme has “clear and attractive tax incentives” so consumers can easily understand the benefit of long-term investing. SIAs should also be easy to understand and use, have broad investment options, and allow access to funds on request.

They should also have “prudent” contribution limits that balance encouraging participation with “wider financial system considerations”. If contributions were not capped, it could lead to the risk of a large outflow of bank deposits into SIAs.

BPFI said it was also important that a launch of any such scheme must be accompanied by a “strong, co-ordinated financial education and public awareness programme, led jointly by Government, regulators and industry”.