A beginner’s guide to investment savings in Ireland

Investment savings: the key points

• Investment savings pool your money into professionally managed funds holding shares, property, bonds, and cash.
• They aim for higher returns than a deposit account over the medium to long term, giving your savings a better chance of keeping pace with inflation.
• Plan to invest for at least three to five years, and keep any money you’ll need within 12 to 24 months in a separate deposit account as an emergency fund. 
• Choose how to invest: a regular monthly plan from €500 a month with bonkers.ie, a lump sum investment (often called an investment bond) from €5,000, or both.
• Check each fund’s ESMA risk rating, which runs from 1 (lowest risk) to 7 (highest risk).
• Factor in the costs: an annual management charge of typically 1% to 1.5%, a 1% government levy on every amount you invest, and any early encashment penalties.
• Look for a 100% allocation rate, which bonkers.ie aims to offer wherever possible, so every euro you invest goes into the fund.
• Let your insurer handle the tax: Exit Tax of 38% (35% from 1 January 2027) is deducted automatically, and deemed disposal applies every eight years.

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If you’re thinking about moving beyond a deposit account, investment savings are a straightforward first step into investing. This guide to investing for beginners in Ireland covers the investing basics: what investment savings are, how they work, the risks involved, and the tax rules to know before you begin.

Deposit accounts remain a secure place for your emergency fund. Their interest rates often struggle to keep up with inflation, though, so your money’s purchasing power slowly diminishes over time. However, investment savings let you aim for higher returns over the medium to long term. They’re structured products from life assurance companies such as Zurich, Irish Life, and Aviva, which pool your money into diversified funds managed by professionals. You can invest a lump sum, a monthly amount, or both. At bonkers.ie, we’ve launched a new investment savings service to help you get started. 

What are investment savings?

The word “investing” can bring to mind a busy stock exchange floor or risky bets on individual technology companies. Investment savings in Ireland are much more structured and diversified.

On bonkers.ie, investment savings are unit-linked life assurance policies: investment products provided by life insurance companies. You might also hear them called “savings plans,” “investment bonds,” or “assurance funds.”

How investment savings differ from deposit accounts

A regular savings account is a deposit product. A bank holds your money and pays you a set interest rate. Your money is secure up to €100,000 under the Irish Deposit Guarantee Scheme, but growth is usually low.

An investment savings plan works differently. Your money buys fund units that rise or fall in value based on market performance. Because these plans sit outside the Deposit Guarantee Scheme, you accept a degree of risk in exchange for potentially stronger growth over three years or more.

How diversification works

One of the main benefits of these funds is diversification. Instead of buying shares in just one company, your money is spread across:

• Equities (shares): ownership stakes in companies around the world.
• Bonds: loans to governments or companies that pay interest.
• Property: commercial or residential real estate.
• Cash: money held in secure deposits for liquidity.
• Commodities: raw materials such as gold, oil, or energy.

Spreading your money across these asset classes helps smooth out the ups and downs of the market. If equities have a bad year, bonds or commodities might perform well, balancing the overall performance of your investment.

Understanding risk and reward

The basic principle of investing is straightforward: achieving higher returns usually means accepting more movement in your balance along the way. In financial terms, this movement is called volatility.

The ESMA risk scale explained

European investment funds use a standard 1-to-7 risk scale set by the European Securities and Markets Authority (ESMA). This makes it easy to compare products.

• Risk level 1–2 (low risk): these funds invest mostly in cash or government bonds. They’re stable but offer low potential returns, often barely beating inflation.
• Risk level 3–4 (medium risk): these are multi-asset funds holding a mix of shares, bonds, and property. They aim for steady growth without extreme volatility. Many beginners start here.
• Risk level 5–7 (high risk): these funds invest heavily in equities (shares). They have the potential for the highest returns, and their value can drop significantly during market downturns.

How long should you invest for?

Time is the most effective way to manage investment risk. These funds are a medium- to long-term commitment rather than a quick win. The golden rule is to invest for at least three years, and ideally five or more.

Markets move in cycles, with good years and bad years. If you invest for only one or two years, you might need to withdraw your money during a dip and lock in a loss. Over five years or longer, markets generally trend upwards, giving you time to recover from temporary dips.

If you know you’ll need your money in the next 12 to 24 months, for example for a wedding or a house deposit, a high-interest deposit account is likely a better fit for you.

Types of investment plans

You can build your investment savings in two simple ways, or combine both depending on your budget.

1. Regular savings plans

You set up a direct debit to contribute a fixed amount each month, from €500 upwards. This uses a strategy called "dollar-cost averaging" (or euro-cost averaging), and is ideal for building wealth over time.

When market prices fall, your fixed monthly payment buys more fund units. When prices rise, you buy fewer. Over time, this smooths out your purchase costs and removes the stress of trying to time the market. It’s a disciplined, automated way to build savings.

2. Lump sum investments

If you have a significant amount of money in a bank account, from an inheritance, a redundancy payment, or years of saving, you can invest it all at once as a lump sum. This is often called an investment bond.

A lump sum puts your money to work straight away. It can feel like a bigger step than a regular saving plan, because all your capital is exposed to the market price on day one. A common approach is to keep a portion of your savings in cash for emergencies and investing only the surplus you can afford to lock away for at least three years.

The costs of investment savings

Unlike a standard savings account, which is usually free to hold, investment funds charge fees. These fees pay for the fund managers who research and select assets, the administration of the policy, and the advice you receive. 

Annual management charge (AMC)

The AMC is the most common fee: a percentage of your total fund value taken every year. In Ireland, it typically ranges from 1% to 1.5% for standard execution-only or advised investment savings.

For example, if your fund grows by 6% in a year and the AMC is 1.25%, your net return (before tax) is 4.75%.

Allocation rate

The allocation rate is how much of your money actually buys units in the fund. A 100% allocation rate means every euro you invest goes into the fund. Some older or more complex policies have an allocation rate of 98% or 99%, meaning an entry charge is deducted before you start. 

bonkers.ie aims to offer products with 100% allocation rates wherever possible, so your money works for you from day one.

Government levy

The Irish government charges a 1% stamp duty levy on life assurance investment premiums.

• If you invest a lump sum of €10,000, €100 goes to the government, and €9,900 is invested.
• If you save €250 a month, €2.50 goes to the government, and €247.50 is invested. 

This levy applies to all life assurance investment policies in Ireland.

Early encashment penalties

Most plans let you withdraw your money whenever you like, though early encashment penalties may apply if you withdraw within the first three years. These recoup the initial setup costs of the policy. Check the terms and conditions for these charges carefully. If you think you might need the money soon, choose a product with high liquidity and low or no exit penalties.

How are investment savings taxed in Ireland?

Here’s how tax works on investment savings in Ireland.

Exit Tax

Profits from these policies are subject to Exit Tax. In 2026, the rate is 38%, and it will fall to 35% from 1 January 2027 for Irish and certain foreign life assurance products. 

The insurance company calculates and deducts the tax for you before paying out your returns. You generally don’t need to file a tax return for these investments, which makes them very convenient if you prefer a hands-off approach.

What is deemed disposal in Ireland?

Deemed disposal is a unique Irish tax rule that treats your investment as sold and bought back every eight years, so Exit Tax is due on any growth even if you haven’t withdrawn money. Your insurer calculates and deducts the tax for you.

• Year 8: tax is paid on any growth since the start date.
• Year 16: tax is paid on further growth since year 8.
• Year 24: tax is paid on further growth since year 16.
• Final encashment: when you cash out, any remaining tax is calculated and paid.

For example, if €10,000 grows to €14,000 by year 8, tax is due on the €4,000 gain. At the current 38% rate, that’s €1,520. From 1 January 2027, the rate falls to 35%.

Deemed disposal is often criticised for reducing the compounding effect of your savings. Even so, many people find these funds attractive for two reasons: gains grow without tax being deducted during each eight-year period (known as “gross roll-up”), and there’s no annual tax return to file.

Choosing the right fund for you

Choosing the right fund depends on your personal circumstances, your financial goals, and your attitude to risk. You can usually switch between funds after you start, for example moving to a lower-risk fund as you get closer to your goal. 

Risk levels 1 and 7 sit at the extremes of the scale, so most investors fall somewhere between the profiles below.

The cautious investor

If you’d feel uneasy seeing your savings drop in value, you are likely a cautious investor (risk level 2 or 3). You might prefer a fund with more bonds and cash and less exposure to shares. You accept that your returns might be modest, and you prioritise protecting your capital.

The balanced investor

You understand that markets fluctuate and are willing to see your balance dip occasionally in exchange for better long-term growth (risk level 4). A multi-asset fund is usually the best fit here. These funds are actively managed, so the fund manager shifts money between shares, property, and bonds depending on how the global economy is performing.

The adventurous investor

You have a long time horizon of perhaps 10 or 15 years, and you want to maximise growth (risk level 5 or 6). You’re happy to invest heavily in equities and can look past short-term market crashes, knowing you have time to recover.

Get help finding your risk profile

At bonkers.ie, we can help you work out your risk profile. Before you choose an investment savings product, you’ll typically complete a risk questionnaire. It asks about your finances, your experience with investing, and how you’d feel if your investment lost value. The result gives you a risk score, helping you match with a fund that suits your comfort zone.

Investment savings vs a savings account at a glance

Here’s how investment savings compare with a regular deposit account.

Start your investment journey

Investing is open to everyone, and getting started is simpler than you might think. By setting aside part of your monthly income or putting a lump sum to work, you give your money the potential to grow and outpace inflation over time.

Time and patience are the key ingredients. Markets will always move up and down, and a long-term plan with a diversified fund puts you on track for a stronger financial future.

Whether you’re saving for a dream home, a child’s education, or a long-term safety net, investment savings can help your money grow over time. Use our investment savings service to find a fund that suits your risk profile and goals.