We\u2019re a nation of savers \u2013 but while we\u2019re good at squirrelling money away, we\u2019re not great at making it work as hard as it might. <\/p>\n
Irish households have more than \u20ac170 billion on deposit with banks, with the vast majority of it earning virtually nothing, resting in current or on-demand deposit accounts enjoying negligible interest rates. And what do we mean by negligible? <\/p>\n
Well, AIB<\/a>, Bank of Ireland<\/a> and PTSB <\/a>will give you 0.25 per cent, 0.1 per cent and 0.01 per cent respectively on your lump-sum savings. It\u2019s even worse when inflation, currently running at close to 4 per cent, is added to the mix. That means those with money on deposit in a low-yield current account will lose value at a rate of more than 3 per cent between now and next June. <\/p>\n There are better rates available \u2013 Bank of Ireland for example offers a 3 per cent rate on regular monthly savings of up to \u20ac2,500 a month, but the interest drops to just 0.5 per cent once savings reach top \u20ac30,000. That 3 per cent rate is also before deposit interest retention tax (Dirt) is factored in, and the tax obligation will cut the interest by one third. <\/p>\n Raisin Bank<\/a> offers one of the best rates for cash on deposit, with a return of 3.1 per cent on sums up to \u20ac100,000, without having to lock them into a fixed term, currently available. All deposits are protected by Germany\u2019s guarantee which \u2013 like the Irish guarantee \u2013 covers sums up to \u20ac100,000. But savers do have to file a tax return themselves, as Raisin does not deduct Dirt at source like Irish banks do.<\/p>\n [\u00a0Starting out or starting over? Four financial habits to live byOpens in new window<\/a>\u00a0]<\/p>\n There are other options on the table, with the likes of Bunq<\/a>, Revolut<\/a>, N26 and a host of Government bonds offering Irish savers okay value for money, but convincing people of the benefits of acting is not easy. <\/p>\n Which takes us to the elephant in the room \u2013 or the elephant in the hallway, planning to enter the room soon. A new Government savings scheme is to be announced by Minister for Finance Simon Harris in his budget later this year. <\/p>\n While the details have yet to be confirmed, the plan is to make investing easier and more transparent to help Irish consumers move their cash from poorly performing bank accounts to more lucrative managed funds. <\/p>\n As we have highlighted, money left in a typical deposit account might earn a saver 2-3 per cent (pretax) if it is doing well compared with an index fund which might return closer to 10 per cent. Returns at that rate could be made even more attractive if, as seems likely, the State will style its new scheme on the Swedish model, which sees savers spared regular capital gains and income taxes and face an annual charge based on the total sum saved above a certain limit.<\/p>\n \u201cWe want to make investing simpler, clearer and more accessible for ordinary people, and help their hard-earned money work harder for them over time,\u201d Harris told an investor forum hosted by the Central Bank of Ireland at the end of March.<\/p>\n \u2018Following the ECB\u2019s first interest rate increase in over a year, Irish savers should be asking whether their money is working hard enough\u2019 <\/p>\n \u2014 \u00a0Nick Charalambous, Alpha Wealth<\/p><\/blockquote>\n \u201cThis will be a priority for Government. Our aim is to legislate for the framework in 2026 and to allow accounts to be offered from 2027.\u201d<\/p>\n He said the account would be designed as a \u201csimple, one-stop option\u201d for individuals, adding that the Government wanted to \u201csimplify and adapt the tax framework to further support retail investment\u201d.<\/p>\n \u201cIreland still does not have a sufficiently diversified savings and investment culture. Too much of people\u2019s hard-earned savings remains in low-yield deposits, where inflation can erode value over time.\u201d<\/p>\n It seems like Harris will be pushing an open door among the vast majority of Irish adults. <\/p>\n Almost three-quarters say they will be open to investing for long-term wealth-building rather than relying on low-interest cash deposits, if the Government introduces simple, tax-efficient investment accounts, according to research from Royal London Ireland published last week.<\/p>\n The survey found that one in five said they would \u201cdefinitely\u201d invest, while 54 per cent said they would \u201cpossibly\u201d consider it.<\/p>\n \u201cThese findings suggest that people in Ireland may be more open to investing than is often assumed, particularly where the process feels straightforward and easy to understand. Just 2 per cent of respondents said they already invest,\u201d said the chief executive of Royal London Ireland, Noel Freeley. <\/p>\n \u201cWhat really stands out from the research,\u201d he continued, \u201cis that the barriers are less about fear of losing money, and more about access to information and feeling informed enough to make a decision. That gap between intention and behaviour is particularly interesting.\u201d<\/p>\n Among those who already save regularly, 56 per cent said they would possibly invest if simple, tax-efficient investment accounts were introduced, compared to 44 per cent of those who do not currently save. Savers are also almost twice as likely to say they would \u201cdefinitely\u201d invest, at 21 per cent, compared to 12 per cent of non-savers.<\/p>\n\n