Ireland’s New Finance Minister Harris Eyes Savings Scheme Inspired by UK, Canada and Sweden

Ireland’s Tánaiste and newly appointed Minister for Finance, Simon Harris, is exploring the introduction of a new savings scheme designed to improve returns for households. The plan, currently under development by his officials, draws inspiration from similar initiatives in the UK, Canada, and Sweden, and could be unveiled as part of October’s budget.

How Might the Scheme Work?

The potential models, as referenced by Harris in a recent RTÉ interview, center around providing tax advantages to savers, subject to certain limits. These limits could take the form of annual contribution caps or tax-free savings pot thresholds. The core benefit would be the exemption from taxes on investment gains, income from dividends, and bond interest, within those limits.

Here’s a look at how similar schemes operate in other countries:

• United Kingdom (ISA): Offers an annual investment limit of £20,000 (€22,900 as of February 2026).
• Sweden (ISK): From 2026, the first 300,000 Swedish Krona (approximately €28,000) in a fund is tax-free and exempt from annual charges.
• Canada (TFSA): Has an annual contribution limit of $7,000 (€4,300), with unused allowances rolling over to future years. A Canadian saver who has never contributed since the scheme’s inception in 2009 could now contribute over $100,000 tax-free.

For Irish savers, adopting these models could imply avoiding the current 33% capital gains tax on investment profits or income tax on dividends, subject to contribution or pot size limits. Investment in exchange-traded funds (ETFs) could become more tax-efficient, eliminating the current “deemed disposal rule” which requires investors to pay 38% tax on portfolio profits every eight years, even without selling the investments.

Potential Tax Structures

The Irish government could choose to levy some tax at a reduced rate, or follow the Swedish model, which previously applied a fixed charge to savings pots. While Sweden initially charged around 0.7-0.85% annually (resulting in a €350-€450 charge on a €50,000 pot), a new tax-free fund amount of 300,000 krona (€28,000) has been introduced, eliminating the fixed charge for smaller savings.

A key principle of successful international schemes is simplicity, with the provider handling all tax-related processes, and allowing savers easy access to their funds.

What Types of Savings and Investments Might Be Covered?

A crucial decision will be determining which savings and investment options are included. The UK and Canadian schemes encompass bank deposits with no investment risk, though low interest rates have limited returns on cash ISAs in the UK. The UK is reducing the annual contribution cap on cash ISAs for under-65s to £12,000 from April 2027. Sweden’s scheme focuses on tax relief for investments in shares, bonds, and funds.

Including cash deposits in an Irish scheme would exempt savings from Deposit Interest Retention Tax (DIRT), currently at 33%. However, with many deposits already earning minimal returns, prioritizing this option may not be a key policy goal. Banks may advocate for including deposit options to maintain their savings base.

Shares, investment funds, and government bonds would likely be included, offering potentially higher returns but also carrying investment risk. The average annual return on a UK stocks ISA has been 6-7% over the past five years, significantly outperforming cash ISAs, though returns can fluctuate, as seen with a 3% loss in 2022/23.

Broader Policy Goals and Considerations

The scheme could potentially be linked to other policy objectives, such as incentivizing homeownership, similar to the UK’s Lifetime ISA with a 25% government bonus. Ireland’s Help-to-Buy scheme already provides a tax refund for first-time buyers. The integration with existing pension schemes and the potential impact on capital taxes, which the Commission on Taxation has suggested are currently too low, will also need careful consideration.

There is also the question of whether the scheme will encourage savers to shift existing investments to take advantage of the tax benefits, and whether it will primarily benefit higher earners or lead to a broader recalibration of savings and investment taxation.

Channeling Investment to Irish SMEs

Harris has expressed a desire to facilitate funding for Irish small and medium-sized enterprises (SMEs). However, limited stock market listings pose a challenge. Creating products that channel investment to private businesses is difficult, as demonstrated by the mixed results of previous schemes like the Business Expansion Scheme (now the Employment and Investment Incentive Scheme). The UK’s “innovative” ISA, covering investment in business lending, is a higher-risk option.

The potential for participation in a broader EU savings and investment union, aimed at creating a large pool of savings for businesses across the bloc, is also being explored.

The Bottom Line

International experience demonstrates that these schemes can be successful in attracting significant savings. Simplicity, low and transparent fees, and easy withdrawals are crucial, as evidenced by the success of schemes in the UK, Canada, and Sweden. Key decisions regarding investment coverage, tax rules, and risk disclosure will be vital to the scheme’s success in Ireland.