Personal Retirement Savings Accounts (PRSA)
Warning: If you use your PRSA purely for Additional Voluntary Contributions you will not have access to your money until you retire.
What is a PRSA (Personal Retirement Savings Account)?
A pension is one of the most important investments you can make in your life. PRSAs are a type of pension plan designed to offer flexibility, convenience and value for money to people saving for their retirement. The aim of a PRSA is to provide an employee with a pension fund at retirement. A PRSA is a personal policy in the name of the PRSA holder and the proceeds of the PRSA are available to provide the PRSA holder with retirement benefits when they retire or reach age 60.
Employees can save monthly and pay once-off contributions which go into their Irish Life Corporate Business Group PRSA plan. These contributions are then invested in the investment fund(s) the employee chooses.
PRSA holders have a number of choices in terms of what form of retirement benefits they can take. These benefits can be taken in the same way as a personal pension plan.
Warning: If you invest in this product you will not have access to your money before you reach age 60 or until you retire.
If you use your PRSA purely for Additional Voluntary Contributions you will not have access to your money until you retire.
What are the advantages of a PRSA?
Tax relief and tax free growth
PRSAs are a very tax efficient way of saving for retirement. Payments you make to your PRSA can qualify for generous tax relief so that they will cost you less than you may think. The table below shows how much investing €100 into your PRSA every month will actually cost you depending on your tax rate.
|If you pay tax at 41%||If you pay tax at 20%|
|€100||Total Investment to your pension||€100|
|- €41||Less tax saved||- €20|
|€ 59||Net Cost to you||€ 80|
The rates of 20% and 41% are the current tax rates and are subject to change. If you are a PAYE person these are the rates that apply to you. Tax relief is normally given at source through the Net Pay arrangement. Alternatively you may need to contact your local Inspector of Taxes if you make a once-off lump sum contribution.
Revenue allows full tax relief for PRSA contributions up to the limits as shown in the following table.
|Age||Maximum % of taxable earnings allowable for tax relief on your pension contributions|
|60 and over||40%|
Note: Total earnings include all taxable income. The maximum contribution levels are the combination of employee and employer contributions. The earnings limit is currently €115,000 p.a. (January 2013). The entitlement to income tax relief is not automatically guaranteed.
Your PRSA pension contributions are invested in a fund that grows tax free.
PRSAs: employer contributions
Any employer contributions made to a PRSA on your behalf are treated as a Benefit-in-Kind (BIK). While these contributions do qualify for income tax relief, they don't qualify for relief from PRSI or the Universal Social Charge.
- Contributions to a PRSA are very flexible, you can vary your regular contributions or make once-off contributions. They can be deducted from your wages by the company payroll and you can stop and start contributing without any charges.
- If you move jobs or employment status you can transfer your PRSA fund to your new employer or to an individual PRSA and continue contributing. There are no transfer charges.
- Employers can contribute to a PRSA plan if they wish to and help to increase your fund.
PRSA retirement options
A PRSA builds up a fund which is available to you at retirement, at any stage between age 60 and 75 and you can decide at the time what you wish to do with your fund. You can take up to 25% of the fund as a tax free lump sum (subject to a maximum lifetime limit of €200,000). With the rest you can choose from the following options:
- Pension Income: Use the balance to buy a pension income that is payable for the rest of your life. The level of pension obtained depends on the annuity rates at the time of retirement.
- ARF (Approved Retirement Fund): Keep your fund invested in a special fund called Approved Retirement Fund and take money out of this fund when it suits you.
- PRSA post retirement: You can keep your PRSA invested as a PRSA post retirement
- Taxable Lump Sum: Take a taxable lump sum.
Value for money
The maximum charges for Standard PRSAs are capped by the Government at 1% a year of the fund value (called annual management charge) and 5% of each contribution. Your Preliminary Disclosure Certificate, which you receive before you sign a PRSA contract, will detail the product’s specific charges. The Policy Terms and Conditions, which you receive after you have entered into a PRSA contract, will also detail these specific charges.
What information will I get with my PRSA?
Irish Life Corporate Business is committed to providing you with all the information you need before and when you start your PRSA and during the years of being a PRSA holder.
- Before you start your PRSA you will get a document called “Preliminary Disclosure Certificate” that will outline the benefits in broad terms.
- When you start your PRSA you will get a year by year projection of your contributions, information on fund growth, charges and your likely pension on retirement. You will also receive a PRSA net pay certificate and detailed Policy Terms and Conditions.
- During the life of your PRSA plan you will receive statements every half year outlining how much was paid into your PRSA over the last half year and the value of your PRSA at that point. You will also get an investment report on all of the funds your contributions have been invested in. Every year you will get a projection similar to the one you received at the start of your PRSA.
- In addition, you can find out the value of your fund seven days a week by using our dedicated online service Pension Planet Interactive
To find out more about PRSAs you can view our PRSA literature here: