Lower-than-expected annual €12,000 investment account limits may curb take-up

The lower-than-expected annual tax-free investment limit and 1 per cent tax on assets above €50,000 in the Government’s new personal investment accounts could limit participation in the scheme, according to investment industry sources.However, the latest details of the plan in Budget 2027 have been broadly welcomed as a strong first step to move Irish households from having one of the highest savings ratios in Europe to investing to meet financial goals. People will be able to put €12,000 a year tax-free into the new accounts, which will be available from next July, Minister for Finance Simon Harris said in his budget speech on Tuesday. Brokers Ireland chief executive Rachel McGovern said she had expected the cap to be about €20,000, close to the UK regime – echoing a widespread view from accountancy to stockbroking firms. READ MORE“But the most egregious element is the 1 per cent tax that will apply to anything over €50,000 built up in an account. It’s a stealth wealth tax. And it applies whether an account has made gains or losses in a given year,” said Michael Healy, chief executive of IG Consumer at UK investing and trading platform IG Group, which launched commission-free investing in stock and exchange-traded funds in the Republic last year. Healy said that these will limit uptake by households in the scheme and possibly put off some overseas investment service providers that have been looking at participating in the initiative. This, he said, would result in lower competitive pressure on fees and charges. [ Ireland’s new personal investment accounts: Here’s how the scheme will workOpens in new window ]However, an industry taskforce organised by Financial Services Ireland said in a report published earlier this year that it expects fees “similar to other jurisdictions, to be competitive”. Industry sources say that all-in annual fees, including charges by service providers, underlying investments, and trading costs, could range from 0.5 of a percentage point, for accounts where no advice is offered, to 1.5 per cent, with advice. However, they said that pricing structures will not be finalised until closer to the planned July 1st launch date. Budget 2027: Does this giveaway budget have potential banana skins that might lie ahead for the Government?James Costello, head of Davy’s portfolio management group, also said that the lower-than-expected annual tax-free investment allowance will lead to a lower participation rate than if it were set at €20,000. “This is meant to be for people who are trying to address financial resilience of their household outside of retirement provision, such as saving for things like their kids’ education, a deposit for a house, or elderly care for parents,” he said. “But I’d have an expectation, and very significant hope, that the €12,000 would increase over time.” McGovern, of Brokers Ireland, agreed that the plan “is a good start” and will likely evolve over time. But while the tax treatment of investments in personal accounts has been designed to be simple for individuals to understand, she noted the wider regime for retail investors remains complicated, with an ongoing “deemed disposal” or exit tax regime (both reduced in Budget 2027 to 35 per cent from 38 per cent), and 1 per cent life insurance levy. [ Fewer than one in four interested in investment accounts, survey showsOpens in new window ]Any tax due on the new investment accounts will be calculated and paid at source by the companies providing the investment funds available under the scheme.Teresa Kelly Oroz, head of public policy at Irish Life, welcomed the fact that there is no minimum investment for the new accounts. “This allows people to grow more comfortable with investing and developing that behaviour,” she said. Revenue said on Wednesday it plans to set up a forum between it, prospective investment account providers and their third‑party software providers to focus on the technical aspects of the project. This will include account opening, eligibility validation, account life cycle processes, and pay‑and‑file obligations. While not clarified in Tuesday’s announcement, there is an expectation that the 1 per cent stamp duty on purchase of shares in Irish public companies with a market value of more than €1 billion will not apply to trades in the new accounts. A Department of Finance spokesman declined to comment, saying more details will be in the upcoming finance act. It is also expected that the initial €12,000 maximum investment will cover the first six months of the scheme, in the second half of 2027, and be aligned with the calendar year thereafter.