Mark Daly (Fianna Fail)
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I welcome the Minister of State, Deputy Troy.

Eileen Lynch (Fine Gael)
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Gabhaim buíochas leis an Aire Stáit as a bheith linn inniu. This matter relates to the need for Ireland to introduce incentivised savings and investment accounts for Irish savers. It is reported that in excess of €163 billion worth of Irish household savings are currently lying in deposit accounts in banks, earning limited interest and not being invested in the economy. In particular, approximately 85% of this money is in overnight accounts where it earns little to no interest. In reality, any value which it is raising is being eaten by inflation. At the same time, there is a significant push at EU level to get more of Europe’s savings invested in building the innovativeness, competitiveness and productivity Europe's economy needs. This has led to the so-called savings and investment union, SIU.

Just this morning, the European Commission issued a recommendation to member states to encourage them to establish incentivised savings and investment accounts which would encourage savers to invest in accessible investment products backed by shares and bonds.The Commission has recommended tax incentives for such accounts. This recommendation is all about getting savings invested in the real economy, including in financing the growth and scaling of indigenous enterprise. The Commission's recommendation will mean nothing to many EU states which already have savings and investment account models, including France, Italy, Sweden and Poland. Not just in the EU but closer to home in the UK, they have a long-established ISA model. Ireland has nothing. We do not have any bank which provides equity services, not since the SSIA, which 1.1 million Irish people took up. As a result, Ireland has been an outlier with none of our retail banks offering accessible equity-based investment accounts to savers where such offerings are the norm throughout Europe and provided in most member states.

There has been a growing chorus of calls for an Irish savings and investment account from the banks, to Insurance Ireland and, most recently, to Davys and Euronext Dublin. Polling commissioned by Euronext Dublin found that half of Irish savers say they would put some of their savings into accessible investment accounts if their banks offered it. This rockets to a 74% uptake if the Government were to add a tax incentive. The campaign has now been validated by the recommendation from the European Commission. Brussels has issued a call to action but national governments need to take up the gauntlet and, in our case, announce that Ireland will establish an Irish model of savings and investment accounts. If the Government moved quickly, we could potentially have this in place before Ireland takes up the EU Presidency in July of next year. We need to unlock the €163 billion idling on deposit and get it working for the Irish economy and for our savers. Savers, scale-ups and Irish capital markets would all win. I urge the Minister of State that now is the time for the Government to act.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I thank the Senator for raising this important and topical issue. It is also a timely issue, as today the European Commission adopted its savings and investment account recommendation as part of the savings and investments union, SIU, strategy.

Despite the impact of the higher cost of living in recent years, Irish households continue to have substantial savings, with approximately €160 billion in household savings on deposit in Irish banks. Some €9 of every €10 of these savings is held in low-interest, overnight deposit accounts, meaning savers are getting little return for their money. The stark truth is, because of global inflationary pressures, this money is actually losing value.

Discussions on encouraging citizens to invest more has been part of the savings and investments union strategy which the EU Commission launched in March. The central thrust of this initiative is to help citizens to invest more so as to increase the amount of money they have in their retirement and to use the invested money to energise businesses, bringing more growth to the economy. From my engagements across the financial services sector since taking this role, I am particularly confident that Ireland has the right infrastructure across talent and technology to be a key player in the SIU. We must acknowledge that the infrastructure deficit we have across housing, water and renewable energy cannot be solved by Government funding alone. Private capital is necessary to achieve our aims.

The SIU strategy includes measures to advance the capital markets union project. Included in this strategy is a commitment to adopt a European blueprint for savings and investment accounts. This blueprint is meant to offer member states a codification of best practice in terms of savings and investment accounts in the EU.

Here at home, last October, the Minister for Finance published the Funds Sector 2030: A Framework for Open, Resilient and Developing Markets report. The report was timely given the interest in growing retail and savings and investments in both Ireland and the new mandate of the European Commission in the context of the SIU proposal.

At the national level, we are reviewing the recommendations from this wide-ranging review of the funds and asset management sector. Part of the review focused on encouraging retail investment. As part of this aspect of the review, the development of an incentivised retail savings and investment account was considered. The report made eight recommendations on the topic of retail investment, including recommendations to better align the tax on investment funds and life assurance products with that of direct equities by removing deemed disposal and aligning the rate of tax to 33%. The report noted that there may be merit in exploring an incentivised savings and investment account in due course. Developments at EU level in the context of the savings and investment union will have relevance in this regard.

While the report concluded that measures proposed for amending the existing taxation of investment funds and life assurance products should be prioritised, the Commission’s recommendations published today demonstrate the importance of savings and investment accounts within the SIU, which is an important point for consideration.The programme for Government has committed to progressing and publishing an implementation plan taking into consideration the funds review recommendations to unlock retail investment and opportunities to grow the sector in Ireland. Detailed consideration is therefore being given to the best way to support a greater level of retail investment in capital markets and the necessary reforms required. It is likely, given the breadth of the funds review and the complexity of the relevant regimes for the taxation of investment, that the delivery of associated tax measures may take place over multiple Finance Bill cycles.

In line with the Senator’s query, we will continue to consider such proposals in this important area. This work will also take account of developments at an EU level in respect of the savings and investments union and, in particular, the Commission's recommendation on increasing the availability of savings and investment accounts.

Eileen Lynch (Fine Gael)
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I thank the Minister of State for his reply. I am glad to see that, with respect to many of my previous comments, we seem to be very much on the same page. I note he acknowledged the report from the European Commission today.

On the Minister of State’s comments on the reduction of the exit tax on investment funds, I welcome the measure, but this change will primarily benefit those who already have or are inclined to invest in an investment fund. Progressing this exit tax reduction should not prevent the establishment of an Irish model of savings and investment accounts in line with what is in the European Commission's report today. I fail to see why the progress being made and the reports and suggestions being reviewed, covering retail investments, should prevent us from introducing savings and investment funds for normal borrowers and normal savers.

If you look at all the money in deposit tax, the return from the DIRT, you will know that swapping over to investment would come at a relatively low cost to the Exchequer. We have a budget coming out next week and it is vital that we consider making this part of it. I appreciate that such a measure may not be part of the coming budget, but encouragement should be given by indicating this is the way we are going and that we are moving forward at a more rapid pace.

Robert Troy (Longford-Westmeath, Fianna Fail)
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To be abundantly clear, I fully agree with the Senator. Irish savers are depriving themselves of a better return on hard-earned savings. A huge opportunity exists now, particularly in the context of the savings and investments union of the EU Commission, which, as the Senator said, only today published a recommendation on a new savings and investment account. The Irish Government has been a very strong supporter of the savings and investments union, and now the responsibility comes back to the Irish Government to interrogate the recommendations from the Commission this morning and come forward with proposals for Irish savers. A lot of good work has been done in the context of the funds review and the recommendations that emanated from that, and we as a Government need to push ahead with the implementation of those recommendations. We also need to come forward with a concrete proposal on a new savings and investment account. I am meeting my colleague the Minister, Deputy Donohoe, later today to discuss just that and how this budget next week can, I hope, commence with measures that will incentivise people to be more ambitious with their savings, thereby getting a better return for themselves, and invest in products that the Irish Government will be able to use to reinvest to make up our infrastructure deficit. I thank the Senator for having given me an opportunity to raise here today what is a very topical issue.

Mark Daly (Fianna Fail)
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For the next Commencement matter, we will be joined by the Minister of State, Deputy Brophy. I thank Minister of State, Deputy Troy for being with us to answer the question from Senator Lynch.