The Irish Association of Investment Managers (IAIM) this week has called upon the Government to review the potential of the association's proposal of a tax-based savings plan.
The IAIM initially submitted a propopsal for the budget last month, which is along similar lines as the Save As You Earn (SAYE) scheme but would be available to individuals who do not have access to workplace-based SAYE schemes, share options or profit-sharing schemes. Approximately a mere 2.5 per cent of Ireland's working population currently have access to a SAYE scheme.
Under the IAIM proposal, savers would be able to invest up to £500 per month in unit funds for a minimum 5 year period. Within an overall limit of £6000 per annum they would also be able to invest performance pay. Tax relief at the marginal rate would apply, provided that the contributions did not cease except for specific reasons such as death, disability or redundancy. On encashment after the 5 year period, gains would be taxed at the then standard taxation rate on unit funds. The unit funds would be prohibited from investing in cash or money market funds to avoid increasing the lending capacity in the economy.
At the time of the budget, the Department of Finance rejected the proposal, saying that it could not find any evidence to support the IAIM's claim that a tax-based savings scheme would be successful. Indeed, the department says such a scheme would appeal to more established investors who would transfer their current savings to the vehicle rather than encouraging new investors to take up the scheme.
The scheme would appear more convincing if it hadn't been proposed by the very group of people who would benefit most from its adoption.
IAIM chairman, Mr Martin Nolan, said the association felt disappointed by the government's attitude and that its proposal had not been adopted in the Budget. The association urged the government to reconsider its decision by arguing that the need to reduce inflationary pressures was widely accepted: 'A positive approach by Government to increasing medium term savings was necessary if this objective was to be achieved. This should be aimed, in particular, at the large proportion of the working population which does not have access to savings instruments such as SAYE or profit share schemes.
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