Saturday 23 November 2019

Standard Life calls for end to 'unfair' tax on 600,000 savers

Paschal Donohoe. Photo: Collins Photo Agency
Paschal Donohoe. Photo: Collins Photo Agency

Charlie Weston - Personal Finance Editor

Finance Minister Paschal Donohoe has been urged to reverse the situation that sees 600,000 savers "unfairly" taxed.

Consumers who put money into a savings account have benefited from a reduction on the tax on the interest since the last Budget - and the Deposit Interest Retention Tax (Dirt) is due to keep falling up to 2020.

The Dirt rate has fallen from 41pc to 39pc and is due to drop to 33pc in the next three years.

But there has been no reduction in the exit tax on life insurance investments or funds sold by life insurance and investment firms.

The Dirt rate and the exit tax rate had been linked for years.

Now Standard Life says the failure to reduce the exit tax rate means 600,000 savers are losing out.

"Standard Life has written to the Finance Minister Paschal Donohoe urging him to reverse last year's unfair legislation which penalises mostly small to medium-sized savers diligently trying to secure a better life for themselves and their families, without being a burden on the State," said Jennifer Richards, head of distribution at the investment company.

Reductions in the Dirt rate should be matched by the same-sized cuts in the exit tax rate, Standard Life said.

The life company argued that deposit interest rates are so low that savers with money in a bank are almost guaranteed to lose money.

"With demand deposit saving, people are virtually certain of losing money over the long term," Ms Richards said.

She added that assuming a conservative inflation rate of 1pc over the next 10 years and a interest rate of 0pc a year, it will wipe almost 10pc from an individual's original savings.

Investment funds sold by life companies and banks historically have significantly better long-term returns than deposits, Standard Life said.

People should have the option to buy with at least the possibility of making some money, rather than the virtual certainty of losing a proportion of it over time, Ms Richards added.

"Responsible savers should not incur punitive tax rates for making prudent financial choices," she said.

Irish Independent

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