PRSAs or Personal Retirement Savings Accounts were introduced by the Government in 2002 to increase pension coverage in the private sector. If your employer does not provide you with access to a pension scheme, it must offer you a Standard PRSA scheme with a salary deduction facility.
PRSAs are very flexible, allowing you to increase, decrease, suspend and restart your contributions at any stage. There is no entry or exit charges for switching providers. Contributions to a PRSA are eligible for tax relief subject to certain age and salary related limits. For example, in your 30’s, you may only contribute up to 20% of your income up to a maximum salary cap of €115,000 and receive tax relief at your marginal rate.
Your employer may also make contributions to your PRSA. However, please note that any contribution your employer makes may reduce your own ability to maximise the tax efficiency of your own contribution and this should be reviewed in advance.
The charges within a Standard PRSA are capped with a maximum fund management charge of 1% per annum and a maximum contribution charge of 5%. PRSAs are also used as a vehicle for receiving AVCs (Additional Voluntary Contributions) from people who are members of both public and private sector pension schemes. There are also Non-Standard PRSAs which offer broader investment choices than Standard PRSAs. However, the charging structures for Non-Standard PRSAs do not have set maximums.
Please check out the section on Frequently Asked Questions or why not contact us for more information.
What is a PRSA?
A PRSA is (Personal Retirement Savings Plan) pension product designed to be flexible and portable between employments.
Who is a PRSA suitable for?
Anyone can take out a PRSA, regardless of his or her employment status. If you are already a member of an Occupational Pension Scheme through your Company, you can only take out an AVC PRSA to receive your Additional Voluntary Contributions.
Are there different types of PRSA?
There are two types of PRSA – a Standard PRSA and a non-Standard PRSA. The main differences between them are the charges and investment options;
- Standard PRSA
The maximum charges under a Standard PRSA cannot exceed 5% of contributions paid and 1% per annum of the PRSA assets. There are also restrictions on the types of funds a Standard PRSA can invest in.
- Non Standard PRSA
There are no restrictions on the charges that can be applied to a Non-Standard PRSA which can also invest in a broader range of assets, including direct property.
How much can I contribute?
There is no limit to how much you can contribute but tax relief on contributions is restricted. Contributions paid by you and/or your employer will be combined for the purposes of determining maximum contribution limits for tax relief purposes. You will receive full income tax relief at your marginal rate on contributions within the limits as set out below, subject to a salary cap of €115,000
|Your age||% net relevant earnings|
|60 or over||40%|
Employees in occupational pension schemes may pay AVCs into a PRSA. The normal limits for tax relief purposes, as described above, apply to the total employee contribution. Any contributions an employee pays to an occupational pension scheme need to be factored in when determining the amount of PRSA contributions eligible for tax relief
Can I stop and restart contributions?
Yes. You are free to stop, start, increase and decrease your contributions at any time, although your PRSA provider may require prior notice of a change. You cannot be charged for changing, stopping or restarting your contributions. Most PRSA providers have an indexation option that allows you to increase your regular contributions in line with inflation each year.
How easy is it to change PRSA providers?
Very easy. You cannot be charged for moving your PRSA away from one provider to another and you cannot be charged for transferring a PRSA into another one.
How are my funds invested?
Your PRSA contributions are invested in a range of funds. These funds can be invested in shares, bonds, property and other allowable assets.
Please note that the value of your PRSA can increase or decrease, depending on the performance of these funds and you may get back less than you put in.
So, it's a risky investment?
All investments carry an element of risk, even those that are supposedly capital secure. To generate a return in excess of inflation and product charges, you will have to accept risk. The level of risk associated with your PRSA will depend on the type of investment strategy you choose.
Your MoneyCoach advisor will help you establish your retirement goals and how much income you will want when you stop work. We will then be able to identify how much risk you will need to take to achieve your goals. If this level of risk is outside your own tolerance of risk, we will adjust either the level of contributions you require to achieve your goals or adjust the level of income you can reasonably expect to have in retirement.
When can I access it?
You can normally start taking your benefits from age 60 (and up to age 75). In certain circumstances, you can take benefits earlier such as if you retire from employment at age 50 or over or if you can no longer work because of a serious illness or disability.
What are my options at retirement?
At retirement you will be entitled to take up to 25% of your PRSA as a lump sum. The first €200,000 of all lump sums you are entitled to at retirement is tax free and the balance up to €500,000 is taxed at 20%.
You can use the remainder of your fund to either;
Buy an annuity, which is a pension for life (subject to income tax)
Invest in an Approved Retirement Fund (ARF) which is an ongoing investment. You must take an annual income from your ARF equal to 4% of the value of the fund and this income will be liable to income tax.
If you have more than one pension plan, you can opt for a blend of an annuity and ARF.