Half of Irish adults save regularly, but many are unsure how to invest. As the Irish Government prepares new personal investment accounts (PIAs), can it effect a sea change in attitudes to money?
Ireland is a nation of savers. But a significant proportion of people are hesitant to take the next step in to investing, according to Ibec group Financial Services Ireland (FSI).
A new study conducted by Amárach Research sheds light on public attitudes ahead of the Government’s planned introduction of PIAs.
“The data shows there is an appetite for retail investment accounts, but there is work to be done to bridge the information gap out there”
One of the most striking findings is that 30% of adults surveyed say they have money to invest but don’t know what to do with it.
This position is most apparent amongst the 25-44 age group (38%) and those earning above €65,000 per year (40%).
On 31 March, Tánaiste and Minister for Finance Simon Harris, TD, announced the development of a Personal Investment Account (PIA) at the first Annual Savings and Investment Forum.
Financial literacy imperative
“Ireland has a developed a reputation as a nation of savers, and this is backed by the findings in this report,” says Patricia Callan, director of Financial Services Ireland.
“That is a positive, but it is important that we also cultivate a new investment culture where people can build wealth through investing in capital markets.”
The study shows that just over half of adults save on an informal basis (often referred to as ‘mattress money’) once a month or more, while 70% hold a formal savings account – there is considerable overlap evident between informal and formal savers (58%).
When it comes to investing, the data shows a stark contrast in overall attitudes compared to saving, with only 16% of those surveyed holding stocks, while 5% had other financial investments.
There are also clear divisions along demographic lines with the use of financial/investment products. For example, those under 35 are much more likely to hold cryptocurrencies (21%) than older respondents, while the over-50s are more likely (35%) to use a life insurance product.
There are notable differences across genders too, with 21% of men holding stocks compared to 11% of women, and men are also more likely to hold cryptocurrencies (16% versus 5%)
With respect to using a new retail investment account, only 23% expressed an interest in using one. Ahead of launching a PIA, the Irish Government has been examining models used in other countries for retail investing, with Sweden’s ISK, the UK’s ISA and Canada’s TFSA regularly cited.
Both Government and financial services providers have indicated that improving the public’s financial literacy on investing will be critical for an Irish PIA to prove as popular as other accounts worldwide.
In the FSI research, 73% of adults say they understand the difference between savings and investments, while 50% are aware of Government plans to introduce an incentivised savings/investment scheme. Notably, those in the 55+ age group are much more aware of the government plans than those in the under-35 category.
A key segment of the FSI research focused on the design of a PIA – when questioned on the most important features for the prospective account, respondents prioritised:
- Higher returns over a deposit account (top feature for 40% of respondents)
- Product simplicity (top feature for 21% of respondents)
- Tax incentives (top feature for 14% of respondents)
On this point, Patricia Callan said: “The data shows there is an appetite for retail investment accounts, but there is work to be done to bridge the information gap out there. We need to ensure that we are improving financial literacy amongst the public so they understand the potential risks and rewards of investing and what it can ultimately offer for them.”
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