The Government is set to introduce a revolutionary new scheme aimed at encouraging small savers and taking large amounts of money out of circulation.
If successful, the scheme could go some way towards reducing inflationary pressures in the economy by taking hundreds of millions of pounds out of circulation which would otherwise be available for discretionary spending.
The Government has previously indicated it intended introducing a scheme to encourage small savers and the details may be included in next Thursday's Finance Bill. Under the terms of the scheme, savers will be able to earn tax-free interest on their savings while the Government will also top up the savings with a regular bonus.
But to qualify for the tax-free interest, savers must leave their money in the special accounts for a full five-year period.
It is understood that the new accounts will be structured so that the return to savers will be greater the longer they leave their money in the accounts.
If, however, savers withdraw their money from the accounts early then they will face a clawback of the DIRT tax benefits they have received.
It is understood the scheme will allow up to £250 (€317) a month to be placed into the new savings account. A minimum monthly payment of £10 will also apply; this is seen as encouraging those on very low incomes or on social welfare payments to avail of the scheme.
The new scheme will not be administered directly by the Government, and it is understood that instead, special status will be given to the accounts, which will be set up by various financial institutions.
At this stage, it is not clear how much the scheme will cost the Exchequer as that will depend on the amount of money invested in the new accounts. But sources said that when the cost of the forgone DIRT and the top-up bonus is taken into account, the costs to the State purse will be significant.
