Many people will use new investment accounts to help pay for retirement

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Large numbers of people plan to use the Government’s new personal investment accounts to boost their pensions.

A survey commissioned by Royal London Ireland found more than four in 10 adults would use a planned tax-efficient investment account to support their retirement savings.

However, pension experts said this raises questions about how well informed some people are about financial matters, as a pension fund is considered the most tax-efficient way to save for retirement.

The survey, which was carried out by iReach, also found about one in five people would use the personal investment account for long-term wealth building. And one in seven would use it to save for their children’s future.

Tánaiste and Finance Minister Simon Harris will outline the details of the new accounts in October’s budget.

They will have a tax-free threshold, with no tax on amounts invested below the threshold. For amounts over it, it is expected a tax of 1pc will apply.

The amount investors will be able to put into the accounts before they are taxed has not been revealed.

Savers will be able to invest in shares, bonds and exchange traded funds (ETFs), but they will not be able to use the accounts to put money into risky products such as crypto assets and derivatives.

Financial providers will be responsible for calculating, reporting and paying any tax due to Revenue on behalf of investors.

The tax structure of the new accounts will replace the current 38pc exit tax and eliminate the “deemed disposal” rule for all assets held within the accounts. Deemed disposal is a tax on unrealised gains every eight years.

Some experts have warned that fees charged by investment firms to handle the personal investment accounts may wipe out some of the expected gains.

Royal London Ireland’s survey of 1,000 Irish adults found nearly one in 10 people said they would use the money to help cover medical costs for themselves or a loved one.

More of those over the age of 55 plan to use funds generated to cover medical costs, and 4pc would fund a trip of a lifetime.

One-quarter of adults under 35 would use the account to save for a house deposit, compared with 5pc of those in their late 30s and early 40s.

Nearly six in 10 of those aged 45 to 64 said they would use the account to support their retirement savings, compared with 23pc of those aged 25 to 34.

Royal London Ireland chief executive Noel Freeley said: “It is understandable that retirement is top of the mind for most people when thinking of likely uses for a personal investment account.”

He said people become more focused on their long-term financial security as they move closer to retirement age, especially those over the age of 45.

Mr Freeley said this highlights the value of impartial financial advice, “as a pension may be a better option for some people due to the tax reliefs available, while for others a personal investment account may offer greater flexibility when planning for retirement”.

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