The Irish Government is preparing to introduce a new personal investment account scheme designed to make it easier for households to invest their savings in shares, bonds and exchange-traded funds.
Tánaiste and Minister for Finance Simon Harris is expected to announce a roadmap for the State-backed accounts, which are due to become available early next year. The plans include several tax and access measures aimed at encouraging more people to invest directly in financial markets.
One of the main features will be the removal of deemed disposal rules from investments held through the new accounts. Under the current system, certain investment funds are treated as having been sold every eight years for tax purposes, even when the investor has not actually sold them. Any resulting gains can be subject to a 38% tax charge.
Under the proposed scheme, investment account providers will instead calculate, report and pay any tax owed to Revenue on behalf of customers.
The accounts will also include a tax-free threshold. Investors will pay no tax while the value of their account remains below the threshold. A low flat rate of tax will apply each year to account values above the threshold.
The Government plans to announce the exact threshold, tax rate and annual contribution limit in the October Budget.
There will be no minimum contribution requirement, minimum holding period or lock-in period. Investors will also be able to transfer their accounts between participating providers without creating a tax liability.
However, an annual limit will be placed on how much people can contribute.
Irish tax residents aged 18 and over will be eligible to open an account. Providers are expected to include firms authorised under the Markets in Financial Instruments Directive, regulated fund managers and regulated insurers or other regulated investment businesses.
The scheme will allow investment in a range of conventional assets, including shares, bonds and ETFs. Riskier products such as cryptocurrencies and derivatives will not be permitted.
The Government hopes the accounts will address Ireland’s relatively low level of direct household investment. Irish households hold about 2.3% of their financial assets in direct investments such as listed shares and debt securities, compared with an EU average of roughly 7.5%.
Cash and deposits account for about 38% of Irish household financial assets, compared with approximately 30% across the EU.
Harris is expected to argue that the new system will give people a simpler route into capital markets. He has said Irish households have strong saving habits but relatively low levels of direct retail investment, meaning many people may not benefit from potential long-term investment returns.
The Government wants the accounts to make investing more accessible to ordinary savers rather than something viewed as suitable only for wealthy people or those with specialist financial knowledge.
