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Tuesday, 16th April 2024
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Lack of savings making Ireland vulnerable to recession Back  
IAIM calls for Government to introduce medium term savings incentives as the household savings ratio drops to below seven per cent.
The report ‘the Provision of Incentives to Save’ found that the decline in savings combined with an over-reliance on property investment is leaving Irish households highly exposed in the event of a downturn of the Irish economy.
According to the report the ratio of household savings in Ireland, which had averaged at 8-9 per cent throughout the nineties, dropped from 9.6 per cent in 1998 to the 2000 level of 6.4 per cent. Personal credit has also rocketed by 250 per cent over the last seven years.

Author of the report Philip Lane, professor of Economics at Trinity College, says ‘there is a real need for policy intervention to promote medium-term savings which provide a buffer stock of assets that better enable households to withstand adverse events and achieve important personal targets.’

Lane recommends strongly that Government policy should use the taxation system to promote medium term savings with an emphasis on higher return equity & bond instruments. The report also suggests that SAYE type schemes, which are currently limited to companies which have share option schemes, should be extended, in equity, to workers in the public sector and other private sector firms.

Commenting on the Lane report Martin Nolan, chairman of the IAIM said ‘The Report clearly shows the value of Save as You Earn schemes in encouraging employees to invest in equity type products. At present, Revenue approved SAYE schemes are available only to employees of companies which have share option schemes - only 2.5 per cent of the working population. This is unfair and elitist.’

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