Ireland’s Savings Scheme Won’t Fix the Real Problem
Recently the Irish government made a lot of noise about a new National Savings Strategy. Big headlines. Tax breaks. Plenty of excitement. I will be honest, at first I was excited too. Then I did some thinking, and this is not a great development for Irish investors.
Here is why. There was an opinion piece arguing these savings schemes could change how Irish people save, “only if done right”. I read it thinking maybe there was a point I had missed. Then I checked who wrote it: a senior figure from the insurance lobby. The same industry that has spent years giving Irish investors poor returns at high fees, and that is now first in the queue to run the administration of any new scheme and collect millions in the process.
And here is what that actually means for your money. I would bet you will not get access to a Vanguard All World or a low-cost S&P 500 ETF through a scheme like this. What you will get is a “safe”, medium-risk mutual fund. The kind that looks responsible on a brochure, generates healthy margins for the people running it, and leaves very little real growth for the person putting money in. That is not a savings revolution. That is a revenue opportunity. Just not for you.
The government wants to move around €170 billion of “idle” savings into the economy. Their answer? Launch another product. Add it to the pile: pensions, auto-enrolment, ETFs, life assurance plans. But more options do not make people invest. They make people freeze. And while everyone freezes, the industry quietly positions itself to collect fees on yet another government-backed vehicle.
The real problem is not that Irish people lack a savings product. It is that the rules punish them for using the ones that already exist. Here is a comparison that should make your blood boil. In Ireland, gambling winnings are completely tax free. Win big on a bet and you keep every cent. Bet on a single share and make a profit, and you pay 33% capital gains tax. Choose a diversified ETF instead, the most sensible option most educators would recommend, and you pay 38% exit tax. The more sensible the investor, the higher the tax punishment. And if you hold ETFs, that 38% applies every eight years under deemed disposal, even if you have done nothing. That one rule can cost a long-term investor hundreds of thousands in gains over a lifetime.
A new savings scheme does not touch any of this. The government can launch a product, tick a box, and leave the punishing rules exactly where they are.
So what can you actually do right now? You cannot fix Irish tax law, but you can work around it. Max your pension contributions before anything else. It is still the most tax-efficient vehicle available, and most people I work with are nowhere near using it properly. If you hold ETFs, model what deemed disposal actually costs you over 20 to 30 years. Even after tax, it is still a strong way to invest outside the pension, but you should know the number. Keep your emergency fund in the highest-rate account you can find, because DIRT takes a third of whatever interest you earn. And if you feel strongly, lobby your local TD for real tax reform, not another product nobody needs.
The system is not going to get easier. But you can get smarter at navigating it.
If you would like help navigating it, here is a short video on what I actually do: https://go.bamillionaire.com/watch-now. Or if you are ready, book a call: https://go.bamillionaire.com/apply
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