Shane Whelan of the School of Mathematical Sciences at UCD believes pensions and SSIAs are the only worthwhile ways of saving because they are either taxfree or qualify for lucrative government top-ups.

His comments come as banks and the government are urging people to keep up the savings habit after SSIAs come to an end over the next year, even though finance minister Brian Cowen has ruled out more SSIA-style incentives in future.

"Long-term saving does not make so much sense if the returns are subject to tax, " said Whelan. "It's okay if you are a charity or pension fund because they are exempt from tax. But does it make sense to roll over an SSIA into more savings? Arguably not if the returns are subject to tax."

His work has been included in the Global Investment Returns Yearbook, published last month by Dutch investment bank ABN Amro, which traces returns on Irish shares, gilts and deposits from 1900 to the present day.

Anyone putting 1 into the Irish stock market in 1900 would now have 13,668 if all dividends had been reinvested, giving a healthy average return of 9.4% a year. But this hides the true picture, according to Whelan.

"These are gross returns and, once investors have been hit for tax, the position changes enormously, " he said.

"When you factor in tax it makes long-term saving look bad value for money."

After inflation, the real return from stocks and shares in the past 100 years drops from 9.4% to 4.8% a year. Even a modest tax rate of 20% would slice the return to about 3% a year, which most investment experts believe is not enough to justify the risks involved in investing in the stock market.

"If the government wants people to catch the savings bug, it should recognise that taxing them on nominal returns before inflation is a big disincentive, " said Whelan. "You might argue that this doesn't matter too much in times of low inflation such as we have now. But low inflation tends to mean low returns."

While real returns from the stock market were disappointing, the alternatives were even worse. Anyone putting 1 on deposit in 1900, and reinvesting all the interest, would now have 195.

After inflation, the value would have only doubled.

Gilts bought for 1 would now be worth 315 and the real growth would be three-fold.

Last year was better than most for Irish investors, with stocks and shares returning 22% compared with 6.8% for bonds and 2.2% for cash.

While this marked a big turnaround from the bear market of recent years, the real rollercoaster ride followed the stock market crash of 1974, the worst in a century, when the market rebounded three years later and returned its best performance since 1900.

Last year's good performance on the Iseq was repeated internationally when all stock markets, with the exception of China, were in positive territory. Since 2000 small-cap and value stocks have outperformed blue-chips and growth stocks in most markets by a substantial margin.