How will Ireland’s State Saving Scheme work? Eoin McGee explains

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Today with David McCullagh 11 min 2 speakers 4 chapters transcribed 2 months ago

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What is Ireland’s new State Saving Scheme and when will details be announced?

David McCullagh 0:00

Details of Ireland's new saving and investment scheme are set to be announced in the budget in October, with accounts expected to open next year. But how exactly is it going to work? Financial planner Owen McGee joins me now to tell us what he knows. Morning, Owen. Good morning, David. Thanks for having me in.

Owen McGee 0:16

So what do we know? Well, one of the things we know right now is everything we know is guessing, right? So we don't really know anything definitively. We have a good idea what's going on. So I've had a couple of interactions here. I've been into the Department of Finance and spoken to a couple of people who are constructing this product, if you want to call it that. I was at a roundtable in the department as well where Minister Troy and Minister Harris and Tanisha Harris were in attendance and kind of gave an idea of what... the roadmap looks like. But one of the things that's very clear is I actually don't believe anything is actually set in stone as to what's going to happen. And we won't know what's going to happen until Budget Day.

Why is current knowledge about the scheme still speculative and who is designing it?

Owen McGee 0:52

And that's very clear. But I do think what the intention is here and what's trying to be achieved here is that as a country, we are great savers. So we save about one euro in every eight euro that we earn. So we're very good at saving. But as investors, we're not great. So if you look at it, less than one in five people in Ireland will have any type of financial instrument, financial product that is investing money. And when I say investing, I'm talking about, yes, I'm talking about shares and I'm talking about bonds and all those scary things. Yeah, we tend to leave it in the bank or the credit union. We have £170 billion sitting in banks. Never mind on Post and Credit Union. We're talking about the banks there, £170 billion sitting there at the moment.

Owen McGee 1:30

And when you compare us to the likes of Sweden, about 46%, 48%, let's say one in two people in Sweden will have an investment instrument of some description. And we're really, if you think about it from a European perspective, we're very far behind as investors. We're great savers, but we're very far behind. And one of the problems we have to be, and one of the things that has to be navigated properly here is there are people in the country who can actually afford to save. And there are people in the country who can't. And one of the issues is when this conversation comes up, we have to be very mindful of there are people who are really struggling and cannot understand why I'm on the radio talking about people investing money when you can't get to the end of the week.

Owen McGee 2:08

And yes, but we can't hold everything back on the basis of... There are some people who have money, who are saving, and it's just not working hard enough for them. And we need a structure in place to try and help them do that.

David McCullagh 2:20

And it's not working hard enough for them. It's not working hard enough for us as an entity, as a country.

Owen McGee 2:25

Absolutely. I did a three-episode podcast on this. If anyone wants to go check it out, Understanding Money, there's the plug, David. But I did a three-episode podcast on this. And I really went deep dive in this. So in the first episode, I went over to Boston and I interviewed a guy called Robert C. Merton. He's a Nobel Prize winner. When I'm studying, when nerds like me are studying, he always comes up in the books, right? And I managed to get an interview with him, which was great. And I just basically said to him, why don't we invest? And what are the barriers? What's the problem with investing? And Ireland's unique. And I also asked him, when the government create this, what should it look like? But it's interesting.

How much do Irish people save versus invest and why does that matter for the scheme?

Owen McGee 3:00

One of the main reasons why we don't invest is there's a couple of barriers. One is we think it's for other people. It's not for me. I don't invest. That's for other people. That's for maybe rich people. And it's not for me. So there's a lack of a kind of a connection to it that it's something that you do. We also have a history of it. Like we weren't, if you think about what our parents did, if you had a few bob, you bought a house and that was the way we did it.