Irish equivalent of the UK ISA

H

Higgsy

Registered User
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Hi,

Bit of a newbie question here.

I am an Irish Resident working in the UK (Northern Ireland). Colleagues who are resident in the UK use Cash and Stocks and Shares ISA which outside of a pension seem to be the most tax efficient way to save money for the future.

From what I can read Irish residents are at a disadvantage here as we cannot avail of an ISA or similar product, is there a particular reason why the Irish government has not introduced a similar scheme to the ISA?

Given the future and possible current state funding issues, would this not encourage Irish people to focus more on saving?
 
At the moment Irish people who have disposable income are saving huge amounts anyway, without any incentive from the government. If you're talking about the longer term, successive Irish governments have shown themselves to be utterly useless at thinking past the next election. The national pensions reserve fund was a good idea and got raided to fund shorter term needs. The State retirement age was due to be extended to 67 and 68 to help with a known demographic issue - ratio of retired people relative to people who are working is gradually sliding towards more retired people. This became an election issue and the government caved in favour of winning votes in the short term.

Just my opinions.
 
Hi Dave,

Fair comments and I agree with you. I am thinking more in terms of some form of wrapper which the UK ISA is to encourage Irish people to save for the future, may it be a deposit for a house, or indeed their retirement. The current CGT and tax rules on ETFs and stocks and shares seem very complicated to me which would put people like me off investing.

If inflation kicks in, those with money on deposit in their banks are going to lose money when they think they are saving.

I work with people from the UK and other European countries and they have been encourages to save in products like ISAs as they are straightforward and accessible. Also we have Irish people buying stocks and shares and crypto on the likes of Revolut and they have no idea they are liable to tax.
 
There is a group called the Irish Savers Action Group (https://isag.ie/) which was setup recently to lobby the government to introduce an ISA/TFSA type scheme.
 
Higgsy said:
Hi Dave,

Fair comments and I agree with you. I am thinking more in terms of some form of wrapper which the UK ISA is to encourage Irish people to save for the future, may it be a deposit for a house, or indeed their retirement. The current CGT and tax rules on ETFs and stocks and shares seem very complicated to me which would put people like me off investing.

If inflation kicks in, those with money on deposit in their banks are going to lose money when they think they are saving.

I work with people from the UK and other European countries and they have been encourages to save in products like ISAs as they are straightforward and accessible. Also we have Irish people buying stocks and shares and crypto on the likes of Revolut and they have no idea they are liable to tax.
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There's certainly a gap to be filled here. It would be good to see a regular savings plan which would facilitate the smaller investor. Some of the regular savings plans on the market at the moment are poor. 1% Government levy on each month's contribution, annual charge up to 1.5% (and sometimes more) and then Exit Tax at 41% on growth. Hard to make a decent return. I'd be all in favour of a plan that allowed you to save up to a certain limit, tax-free, but I think that this should only be introduced along with capped charges by the providers, a fair bit lower than what's out there at the moment.
 
There's zero appetite in Government for a savings scheme like this, even though you'll struggle to find a politician or senior civil servant that would say it's a bad idea. The vast majority of politicians are property heads. You'll not find more than 5 of them that declare that they invest directly/indirectly in the stock market. I doubt that there is any great understanding of saving/investing (outside of property/deposits) amongst TDs.

The 1% Government Levy is an impediment to potentially lower AMCs as some providers cover the cost of this with 101% allocation. The Life Assurance Exit Tax regime makes no sense, to me.

An ISA type scheme as an option on Auto-Enrollment might have been a good idea. At least it would get people (that aren't saving) into the habit of saving. The word 'pension' should be dropped altogether when it comes to long-term saving - it just too far-far away in the minds of younger folk.

Gerard

www.investandsave.ie
 
Things really aren't that bad for savers here compared to the UK.

The lifetime allowance for pensions in the UK is around €1.25m, whereas the fund threshold here is €2m. Tax-deferred pensions actually represent a much better deal for savers than post-tax ISAs and we can save materially more within a pension wrapper than our UK counterparts.

As regards after-tax cash savings, the DIRT rate here is currently 33%. But interest rates on retail deposits are effectively at zero - 33% of zero is, well, zero. So the introduction of a cash ISA would not make any difference to Irish savers as things stand.

In my opinion, a good strategy for most Irish savers is to maximise tax-relieved pension contributions, maintain a high allocation to risk assets (equities) within the pension fund, and keep any after-tax savings in cash or (tax-free) State savings products.
 
Agree with Gerard on this one. At a time when FF & FG are in power because SF didn't put enough candidates forward, they are not going to introduce a tax free saving plan. No matter that it can be used for people to get a house deposit or pay for 3rd level education, it will be spun as another benefit for the wealthy.

Ireland, a population of just under 5 million is constantly being compared to what is available in the UK (66.65 million) and the USA (population 328.2 million). Economies of scale just don't allow the same products to be available in Ireland as in these countries. Just like Amazon doesn't have a distribution centre in Ireland (at the moment), it just doesn't make economic sense.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
@Sarenco
I get your point about the Pension lifetime allowance but the problem with that for those in their 20s and 30s is that the contributions are locked away for the long term. We are missing something that will encourages young people to save and then use for education or say use for a deposit for a house.

With the potential of high inflation on the way, you are likely to see savings on deposit at the bank and in state savings, lose purchasing power.

@Steven Barrett @GSheehy
Thanks for the comments
 
Higgsy said:
@Sarenco
We are missing something that will encourages young people to save and then use for education or say use for a deposit for a house.
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That’s not true actually - we have a scheme whereby tax on savings for a house deposit can be reclaimed:

Land and property

Land and property
www.revenue.ie www.revenue.ie
Although that’s of no consequence at the moment as there is effectively no tax currently being paid on cash savings!
Higgsy said:
With the potential of high inflation on the way, you are likely to see savings on deposit at the bank and in state savings, lose purchasing power.
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If we see a sustained rise in inflation, then interest rates will inevitably follow.

As it stands, inflation (CPI) is currently negative so, in real terms, your purchasing power is actually increasing.
 
Higgsy said:
is there a particular reason why the Irish government has not introduced a similar scheme to the ISA?
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AFAIK the Irish government historically relies more heavily than the UK does on retail savers to fund its deficits. Prize Bonds and State Savings products are very popular in Ireland and last time I checked account for 8% of national debt.

The state could jeopardise this by introducing some kind of ISA-type arrangement.
 
Sarenco said:
The lifetime allowance for pensions in the UK is around €1.25m, whereas the fund threshold here is €2m. Tax-deferred pensions actually represent a much better deal for savers than post-tax ISAs and we can save materially more within a pension wrapper than our UK counterparts.
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Agree.

Also bear in mind threshold in Ireland for top rate of tax is €36k in Ireland and £50k in UK. Wage rates are similar (except City).

So more scope in Ireland to get higher-rate tax relief on pension contributions, and then draw down on lower rate.
 
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