Personal investment account: ‘What is the interest rate in the new scheme?’

After the Government’s planned personal investment account for ordinary savers was finally revealed on budget day, it wasn’t long before the questions began arriving by email to The Irish Times business desk.

Questions such as “Do you get to choose where your money’s invested, or does the government supply guidance via a reliable broker?” and “What is the interest rate in the new investment scheme?”

That latter query is particularly illuminating. It suggests a fundamental misunderstanding about what the personal investment account will be, as the percentage symbol used in that context will denote a return or performance over time for a given stock or fund. There won’t ever be an interest rate applied to the account.

That false impression represents a potential landmine for the Government. If novice investors get involved in the scheme without fully understanding what they’re signing up for, there could be serious consequences for their money, and blowback for the Minister for Finance.

 “If you had a bit of a worry about this, it’s that people kind of see ‘State’ – they see a State investment scheme. And they just - in the back of their mind - think there’s some kind of guarantee here, or ‘I won’t lose my money’,” Cliff Taylor tells the Better with Money podcast.

Taylor writes the weekly Smart Money column and about economics in general for The Irish Times. He’s concerned investors will largely be on their own when it comes to assessing risks of these accounts, and that they will get limited advice about whether the accounts represent a good deal for them.

" I think [the providers] should be obliged to be very upfront about their charges and very upfront about the impact of those charges over a period of time on an investment pot."

Taylor also outlines details that were clarified with the publication of the Finance Bill 2027 yesterday - the legislation that will give effect to the measures announced on October 6th.

So if you’ve been wondering, “Can I move investments I already have into these accounts; will I have to pay income tax on any dividends?” or “Do I pay any exit taxes on profits made under the €50,000 threshold?”, this is the podcast for you.

You can listen to the conversation on the player above or search for Better with Money wherever you get your podcasts.

This episode is brought to you in association with Standard Life