What's the point in saving anymore?

who_ru

http://www.independent.ie/business/personal-finance/pensions/pensioners-will-escape-new-tax-hit-on-savings-3332384.html


the above article is an eye opener for those with any savings or thinking of becoming a saver.

apart from paying a s**t load in tax, from 2014 onwards you will have the privilege of paying a whooping 37% tax on the interest from your savings.

i mean didn't the fact that nobody saved anything encourage the whole SSIA thing in the first place, and no when people are trying to economise, save for the future.....house deposit maybe.....holiday next year.....new car...etc etc the shower in Govt decides to hammer any saving culture.

mike65

The level of savings in ireland is actually quite high if I remember correctly, with about something like one hundred billion sorted away in savings accounts of one sort or another.

ongarite

I presume its to get people to start spending money again instead of hoarding it as has been happening since 2008.
I would guess that the Government has an idea of how much money is tucked away in saving accounts across all the Irish owned banks and the figure is probably quite huge, last estimate I can see is €200 billion from 2010.

We're talking economics 101 here. During a downturn, savings are bad because it means people are not spending in the economy. Also, People are inclined to save because of financial fears for the future during a downturn, hence the disincentive applied.


Why do you feel so strongly about something you know so little about?

yesman2000

People are saving approx. 12-14% of their income (on average, of course) at the moment compared to 1-2% in the boom. This is reducing consumption in the economy. Therefore, it makes perfect sense for the government to increase DIRT. It brings in revenue for them and it's also indirectly incentives to spend more. All going well this will be corrected when (if) things recover.

AlekSmart

who_ru wrote: »

http://www.independent.ie/business/personal-finance/pensions/pensioners-will-escape-new-tax-hit-on-savings-3332384.html


The above article is an eye opener for those with any savings or thinking of becoming a saver.

Apart from paying a s**t load in tax, from 2014 onwards you will have the privilege of paying a whooping 37% tax on the interest from your savings.

I mean didn't the fact that nobody saved anything encourage the whole SSIA thing in the first place, and no when people are trying to economise, save for the future.....house deposit maybe.....holiday next year.....new car...etc etc the shower in Govt decides to hammer any saving culture.

Ah yes....The McCreevy moment.

The SSIA stunt,still resonates with me as one of the defining moments in the story of how Ireland ended up as it is.

I believe there is the makings of a real Pot-Boiler if somebody can start to research the SSIA,s history from the first Blinding Flash of Light somewhere in deepest darkest Kildare to it,s eventual end in Brian Lenihans sitting room.

ardmacha

The SSIA stunt,still resonates with me as one of the defining moments in the story of how Ireland ended up as it is.

The SSIA had the basis of a good idea. However, the funds were released at the election which made it a stunt. Imagine if it had been continued until 2008 when things began to slow, the government could have stopped paying the bonuses, reducing expenditure and people would have had a useful nest egg.

strandroad

yesman2000 wrote: »

People are saving approx. 12-14% of their income (on average, of course) at the moment compared to 1-2% in the boom. This is reducing consumption in the economy. Therefore, it makes perfect sense for the government to increase DIRT. It brings in revenue for them and it's also indirectly incentives to spend more. All going well this will be corrected when (if) things recover.

Unless the money flies out of the country first. I have access to overseas bank account - as do many other people - and with savings interest rates going down then 37% of that taken it makes no sense to keep them here.

Draco

mhge wrote: »

Unless the money flies out of the country first. I have access to overseas bank account - as do many other people - and with savings interest rates going down then 37% of that taken it makes no sense to keep them here.

Just because it's offshore doesn't mean you avoid DIRT. Never hear of Ansbacher? Unless the offshore account is giving you much higher interest rates it has no real benefit over one in Ireland.

strandroad

Draco wrote: »

Just because it's offshore doesn't mean you avoid DIRT. Never hear of Ansbacher? Unless the offshore account is giving you much higher interest rates it has no real benefit over one in Ireland.

They do typically, just checked this week and I'm tempted. I am aware of DIRT but if they encourage me to take it where I get better returns I will prop up foreign deposit books and having it there I may decide to spend it elsewhere too.

antoobrien

ardmacha wrote: »

The SSIA had the basis of a good idea. However, the funds were released at the election which made it a stunt.

I'd be inclined to say that MCCreevy wasn't that far sighted except he did restrict access to NPRF for current spending only on pensions and only from 2025.


They were released a in the year up to the election (depending on when you opened it), so the stunt wasn't the timing around the subsequent election but rather what 5 years of savings was used for in 2006 & 2007.

It ended up helping to extend the housing boom by another year or so as people had 30k to put into a deposit. I remember the calls at the time to invest it in pensions (cant remember if there were any schemes announced).

ardmacha wrote: »

Imagine if it had been continued until 2008 when things began to slow, the government could have stopped paying the bonuses, reducing expenditure and people would have had a useful nest egg.

Things began to slow before 2008, recession was called in 2008 that meant that there were two consecutive quarters of negative growth.

It was estimated that the SSIAs would dump about €14bn into the economy in a single year, so had this pool not been used until 2008 it's almost certain that we would have seen the highs in spending and taxes received recorded for the previous 2/3 years. The cutting of the tax free bonuses would have been the least of the worries of many people holding SSIAs.

johnnyskeleton

Rojomcdojo wrote: »

We're talking economics 101 here. During a downturn, savings are bad because it means people are not spending in the economy. Also, People are inclined to save because of financial fears for the future during a downturn, hence the disincentive applied.


Why do you feel so strongly about something you know so little about?

When a significant factor in a country's woes is a severely undercapitalized banking system, discouraging people to keep their money in those banks sounds like a terrific economic policy. We should also make it illegal to invest your money in start ups or other wealth generating capital investments so that people go to brown Thomas and buy Italian handbags or buy new German cars from a real entrepreneur. That's the sure fire way to kick start the economy.

MagicMarker

If I had thousands in savings, taxing me on the interest is hardly going to make me go and spend it all. That sounds like a particularly stupid reason to spend all my savings.

If I had millions in savings, taxing me on the interest is definitely not going to make me go and spend it all, it will more than likely make me move my savings to somewhere that won't tax me.

yesman2000

Ireland already has one of the highest interest rate on deposit accounts, it's one of the main reasons why Irish banks are losing so much money. Where else would there be an incentive to go inside the eurozone- Nowhere. That's why they can keep increasing DIRT. If you want to search for a better yield you'll have to change currencies, with so many transaction costs and foreign exchange risks included in this exercise it'll probably won't be worth the hassle except if you're talking a few million.


Real question to be answered; Has anyone here removed money from Irish Bank Accounts because the 3% increase on a very small number. I don't think so.

Mr. teddywinkles

yesman2000 wrote: »

Ireland already has one of the highest interest rate on deposit accounts, it's one of the main reasons why Irish banks are losing so much money. Where else would there be an incentive to go inside the eurozone- Nowhere. That's why they can keep increasing DIRT. If you want to search for a better yield you'll have to change currencies, with so many transaction costs and foreign exchange risks included in this exercise it'll probably won't be worth the hassle except if you're talking a few million.


Real question to be answered; Has anyone here removed money from Irish Bank Accounts because the 3% increase on a very small number. I don't think so.

So 1.5% is totally over the top is it. Do you know what banks are offering?
And this is short term saving. Long term about 3% if that.
37% DIRT is scandlous.
Cause spending like mad helped this country so much before.

yesman2000

Mr. teddywinkles wrote: »

So 1.5% is totally over the top is it. Do you know what banks are offering?
And this is short term saving. Long term about 3% if that.
37% DIRT is scandlous.
Cause spending like mad helped this country so much before.

Your understanding of economics is very limited. The main contributing factor to the mess we are in is the sharp decline in consumption, arguably the most important component of GDP. How to you think a recovery can start without spending? What do you think would happen if we save even more than we currently are saving ? To say that spending too much contributed to the recession is true is one respect, to say that if start we "spending like mad" now is going to cause things to get worse is just idiotic. Why are small businesses closing down on a daily basis up and down the country: because consumption has fallen off a cliff. Consumption can be assumed to be the inverse of saving. If you're not saving you're spending and vice versa. If people start spending growth is stimulated, triggering a multiplier effect. World wide interest rates are on the floor so there few options else where.

johnnyskeleton

johnnyskeleton wrote: »

When a significant factor in a country's woes is a severely undercapitalized banking system, discouraging people to keep their money in those banks sounds like a terrific economic policy. We should also make it illegal to invest your money in start ups or other wealth generating capital investments so that people go to brown Thomas and buy Italian handbags or buy new German cars from a real entrepreneur. That's the sure fire way to kick start the economy.

Are you seriously trying to make out that i said that? Exaggerate much? Or what's your deal?

Mr. teddywinkles

yesman2000 wrote: »

Your understanding of economics is very limited. The main contributing factor to the mess we are in is the sharp decline in consumption, arguably the most important component of GDP. How to you think a recovery can start without spending? What do you think would happen if we save even more than we currently are saving ? To say that spending too much contributed to the recession is true is one respect, to say that if start we "spending like mad" now is going to cause things to get worse is just idiotic. Why are small businesses closing down on a daily basis up and down the country: because consumption has fallen off a cliff. Consumption can be assumed to be the inverse of saving. If you're not saving you're spending and vice versa. If people start spending growth is stimulated, triggering a multiplier effect. World wide interest rates are on the floor so there few options else where.

I understand your view but no im sorry not without correction .
My personal view is that I saved my ass off during the boom and before it to buy a place for myself.
While my mates spent frivolously around me I saved what I could.
While my mates bought big I saved and now are debt ridden while I have an opportunity of being nearly potentially mortgage free due to drop in house prices.
Sounds like braggen buts its testament to a f**ked up view by other people on spending habits.
Things still are not corrected.
Yes you need stimulation of the economy through spending but not government forced intervention.
Why do you think the Germans have money to fund everything.
Sounds like a complete generalisation but they save and for a better word of it are tight out and invest their money wisely.
Small businesses are closing down because a bag of potatoe wedges cost e3.70 in centra, a f**kin toffee slice in costas cost e3.50 yet the place was full the other day when I was in it. Grant it probably priced just to pay the rent on the place.
Im sorry if I come across an arrogant d**k but its true.
Consumption is good yes but realist comsumption with real prices with real money.
The government are scaring people with increased taxes yet expect people to spend their savings. Good tactic :mad:

The understanding of economics in this thread has officially nose-dived. I would wager, Mr. teddywinkles, that you very seldom leave Ireland - if ever.

So we all save as prudently as you, where does that leave the economy? How does your ideal economy function? It sounds awfully like you have a concrete stance on an issue you know nothing about. Like certain others in this thread.

creedp

mhge wrote: »

They do typically, just checked this week and I'm tempted. I am aware of DIRT but if they encourage me to take it where I get better returns I will prop up foreign deposit books and having it there I may decide to spend it elsewhere too.

My young fella is always issuing ultimatums like that .. yesterday evening he stated that he was just about to do something good when I said he had to go to bed so now he won't

strandroad

creedp wrote: »

My young fella is always issuing ultimatums like that .. yesterday evening he stated that he was just about to do something good when I said he had to go to bed so now he won't

What's your point? Do you question that people have other options than to start spending on demand? We are not going back to the level of spending we used to have and it's not a bad thing if people think more in terms of financial cushion these days.

I knew a guy who used to buy his daughter every single present she had on her list for Christmas (she was four) and splash on everyone else. One year they needed both cars to transport all their presents going to their family for Christmas. The child would get so much stuff from everyone that the routine was to designate some of the presents for charity straightaway to teach her to share and the rest was to be kept in the press and released in weekly batches.

Since then he lost his job and while he got another one pretty quickly they had a wake up call and are now big savers. The child now gets a few favourites off the top of her list and the rest of the family all have a Kris Kindle. Do you think that if saving is made unattractive for them they will start spending on piles of stuff again, or buy a new car just because they can? They are far more likely to optimise their savings and if it means putting them into other financial products or exporting them so be it. I am too lazy to move mine now, but with the offers I get and with the policy the government enforces it is making more and more sense. Two years ago we wouldn't even research it, these days it's a lunch conversation topic at work.

mhge

mhge wrote: »

these days it's a lunch conversation topic at work.

I'd say those conversations are enlightening experiences.... :rolleyes:

strandroad

Rojomcdojo wrote: »

I'd say those conversations are enlightening experiences.... :rolleyes:

You guys seem to be very skeptical with regard to this point of view. But tell me how they can make me spend if I have a modest, comfortable lifestyle I'm happy with and I appreciate having savings to fall back on should anything happen?

I understand how fueling demand is important for the economy. On the individual level, however, I don't see how they can make me spend more if I don't feel any need to. And yes, having external options is a factor.

It's not just about spending, it's about a specific sort of economically inefficient saving that is great in smallish quantities, but unnessessary in the volume we have right now, which is a result of the economic climate we all face today. The government are simply encouraging less savings in order to boost cash flow around the economy.

ballyharpat

I have to agree with MHGE on this, I feel that the government makes it difficult to accumulate savings, when I lived in the USA, I invested in stocks and paid tax over there. THe trading charges were lower and the CGT was lower, when the option is available to invest in stocks, I would rather do it from the USA or another foreign country where I pay less tax, but still declare my income. When I make more money, I have more to spend, if I had been investing here, my fees for trading would have eaten up my profit on any investments made, why would I bother saving/investing?
Had I not saved, I would have been back in this country without a pot to piss in or a window to throw it out of and I would have, like so many others, looked to the government to put a roof over my head and feed me.

But as a saver you are merely one cog in the machine. There are and always will be die hard savers, and die hard spenders - the vast majority of people are somewhere in the middle. These are the cogs that need oiling, so to speak.

thebman

I usually save 50% of my wage. This attacking savers thing really annoys me tbh.

If you want to encourage people to spend, you need to satisfy their basic needs, one of which is safety and at the moment, nobody feels safe in their jobs do they won't spend.

Doesn't matter how much you tax savings, people would rather have that safety net in troubled times.

ballyharpat

I see your point, but I think if we could get more of the spenders to the middle and more of the savers to the middle, it would benefit the country as a whole, I don't believe that penalizing savers is helpful

strandroad

Rojomcdojo wrote: »

But as a saver you are merely one cog in the machine. There are and always will be die hard savers, and die hard spenders - the vast majority of people are somewhere in the middle. These are the cogs that need oiling, so to speak.

I get your point, but I don't think it's how it works on psychological level. People "in the middle" are saving not because the rates are so attractive; they are putting money away because they have been exposed to or witnessed unemployment, debt traps etc. and to somehow cushion themselves is more important than to spend on non-essentials.

It is a change of attitude of sorts and I don't see how manipulating the rates can trump this need; unless they go down to negative values so that you will be paying the bank to store your savings, akin to renting a safe, and there are regulation in place to prevent capital movement.

Duggys Housemate

The government should exempt the first, what, 10K on earnings. That would generally shut people up. It is good to tax unearned income. No point of just taxing labour.

ardmacha

Taxing interest without adjusting for inflation is entirely unjust. But as noted by several posters the easiest way to get people spending is to reduce uncertainty so that they are less concerned about the future.