If you were extremely online in the 2010s, you might remember a social media practice known as “vague-booking”.
A play on the word Facebook, to vague-book was to post an ambiguous status update aimed at getting attention and a “You OK, hun?” from your network of “friends”.
Cryptic posts included “worst day ever” or “send positive vibes”. There was also another type of vague-book that was more upbeat and deliberately secretive.
“Exciting times ahead! Can’t talk about it yet but it’s going to be amazing.”
The Minister for Finance’s slow trickle of information about a proposed new State-backed investment scheme for ordinary Irish savers has an air of the vague-booking about it.
Simon Harris first mentioned it casually in an RTÉ interview back in February without giving any details beyond the fact he wanted it to benefit “middle Ireland”.
Then, at the end of March he announced his intention to move forward with the idea and that a simple flat rate of tax would apply to it.
And so continued the soundbites and drip-feeding of information about the proposed scheme in the intervening months and a promise that all will be revealed in Budget 2027 on October 6th.
In June, a number of financial influencers were invited to a round-table discussion of what’s become known as the Personal Investment Account. Two of them spoke to the Better with Money podcast back in July about the shape it might take.
There has been much speculation about whether the Government will follow the Swedish model known as the Investeringssparkonto, or the United Kingdom’s Individual Savings Account.
On Monday the Government finally nailed some of its colours to the proverbial mast.
The new investment vehicle will allow Irish savers to take their cash deposits and put them to work in the stock market.
Any gains they make below a certain threshold will not be taxed. Once the amount of money exceeds that threshold, a flat rate tax will apply.
So that means no Capital Gains Tax deemed disposal, income tax on dividends, or exit tax on this mystery amount of money.
On today’s Better with Money podcast Cliff Taylor explains the tax will apply to the amounts above that threshold.
“ So say the limit is €30,000 – and I’m making that up, I have no idea what it’ll be – and you’ve €40,000 in your account. You’ll get taxed on €10,000.”
Many people will be delighted to hear that the intimidating and complex system for declaring your investment profits will be handled by the financial institutions providing the product.
So far, so clear. But there are still some sizeable unknowns that are crucial to understanding the new scheme.
What will that threshold be, beyond which you’ll be taxed? What will that rate of tax be? And what will financial institutions charge for handling the tax administration for you?
The key thing to remember is that this is an investment scheme and not a savings account like the SSIA of the Celtic Tiger era.
Between 2001 and 2006, savers could put up to €250 in these Special Savings Incentive Accounts and for every €4 saved, the government would contribute €1.
“So it was a no-brainer,” says Taylor. “And these accounts are going to offer some advantages in terms of investing in the markets, but they’re not a no-brainer, so to speak. They will suit some people, they won’t suit other people. And the people they will suit are likely to be people who can afford to put money away on a regular basis.”
You can listen to this episode on the player above or search for Better with Money wherever you get your podcasts.
