Personal Retirement Savings Accounts
PRSAs were introduced in 2002 as a flexible, portable type of pension provision. Transfers may be made to and from other types of pension schemes. The PRSA may be carried by a person through multiple employments and self-employment, during his working life.
An individual and / or his employer may contribute to a PRSA. Employers must provide access to a PRSA, where there is no occupational pension scheme or limited access to one. He must enter a contract with a PRSA provider to provide at least a standard PRSA.
There are standard and non-standard PRSAs. Standard PRSAs provide for caps on charges by providers. There must be a default investment strategy. Non-standard PRSAs may allow for a choice of investments.
The tax relief available for contributions to a PRSA is almost identical to that for a personal pension contract. The PRSA itself enjoys similar tax reliefs to those applicable to personal pensions. See the articles on the taxation aspects of pension contributions and the internal exemption of pension funds.
PRSAs can be provided by a wider range of financial services provider, than the traditional personal pension contract, which may be provided, only by an authorised insurance company. PRSA providers can be anyone or more of the following:
- an authorised investment firm including stockbrokers;
- an authorised insurance company;
- an authorised credit institution.
Any entity established within the EU may provide the product. In effect, banks, building society, stockbrokers, investment firms and insurance companies may act as PRSA providers.
A standard PRSA must not be marketed in conjunction with other products.
PRSA contracts must be approved by the Revenue Commissioners. They must comply with the provisions of Revenue legislation and Revenue practice in order to receive Revenue approval. An application is made for approval to the Revenue. The permissible benefits only may be provided by its terms. The Revenue must be satisfied as to compliance. The Revenue may withdraw approval if the terms and conditions of approval cease to apply.
PRSA contracts must be registered with the Pensions Board. The Pension Board regulates the provider and must be satisfied with its competence and transparency. It must be satisfied with the ability of the PRSA provider to provide the product and attendant services.
There are ongoing reporting obligations for PRSA providers to the Pensions Board. They must provide returns on a regular basis. A Register of PRSA providers and products is kept by the Pensions Board. It is available for inspection.
The Pensions Board may withdraw approval of a PRSA product, where it no longer complies with the requisite conditions, ceases business, withdraws the product, or where new circumstances apply, which are such as would affect the original application in a material respect.
The PRSA assets are owned by the PRSA holder. The PRSA assets may not be mortgaged or charged by the PRSA holder. As with personal pension schemes, PRSAs may not be assigned or transferred. This may limit the extent, which creditors may have access to them. The position is unsettled.
The assets of a PRSA must be held by a custodian. The custodian holds the assets separate from those of the provider. This requirement does not apply to insurance companies.
The PRSA holder or provider themselves, may not charge its assets. It appears that it may invest in leveraged investments, which themselves include borrowings coupled with assets.
The PRSA provider must enter contracts with service providers in relation to certain matters. It must appoint an investment manager, auditor, actuary, custodian and administrator. It may act as investment manager, administrator and actuary itself. The custodian, in whose name assets are kept and the auditor must be at arm’s length from it and must meet certain criteria.
The PRSA provider must maintain an internal complaints procedure. The PRSA holder may apply for determination of a complaint or dispute. The application is made in writing and must contain details of the holder, statement of the nature of dispute and complaint. The PRSA provider must make a determination in writing within three months. The matter can be appealed further to the Pensions Authority.
A PRSA actuary must be retained. It may be external or internal to the PRSA provider. The actuary must certify compliance with certain obligations of the provider under the Pension Act. A PRSA administrator may be external or internal. It undertakes the collection and investment of contributions.
An individual or his employer may contribute to a PRSA. Employers must provide access to a PRSA, where there is no occupational pension scheme, where there is limited eligibility or where it has a waiting period in excess of six months. The following requirements are the statutory minimum.
An employer, who is obliged to provide access to a PRSA, must enter a contract with a PRSA provider to provide at least a standard PRSA. An employer is obliged to ensure that employees have access to information on PRSAs.
An employer is obliged to make deductions of employee contributions and remit them to the PRSA provider. If the employee avails of the PRSA, sums deducted must be remitted within 21 days and are held in trust. Employers must give monthly details of the total contributions deducted and made.
Contributions and Investments
Contributions may be made by employers and / or the employee PRSA holder. The minimum contribution is €300 per annum. The minimum investment is €50 euro per transaction or €10 in the case of funds transfer or direct debit.
Standard PRSAs are subject to caps in relation to charges. The limitations on charges may be measured as a percentage of contributions or assets. In the case of a standard PRSA, the maximum charges are 5% of contributions and 1% annually of the fund. Additional sums may be charged in relation to variations, commencement and cessation of contributions.
There must be a default investment strategy for a standard PRSA. This applies unless the holder opts for an alternative strategy. A default strategy investment may only provide for investments in liquid and regulated investments such as authorised unit trust funds, collective investment schemes and insurance based unit linked funds established under Irish or EU legislation.
The pooled funds must have sufficient liquidity of investments, diversification, transparent charges, variable units with share price determined with a minimum frequency.
Non-standard PRSAs may offer other types of investments and investment strategies.
PRSA benefits are based on the level of contributions available and the fund that it ultimately accumulates (net of charges). The PRSA may be used in much the same manner as a personal pension contract. Payments must commence between the age of 60 and 75. The permissible payments are by way of annuity, a lump sum up to 25% of the fund (subject to caps) or alternatively by way of an Approved Retirement Fund.
The annuity must be for the life of the PRSA holder. Additional benefits may be provided by way of a secondary annuity for the benefit of a spouse for life. A lump sum of up to 25 percent of the fund is generally allowed. Where a PRSA fulfils the role of an additional voluntary contribution (AVC), the lump sum is limited by the maximum lump sum that the rules of the occupational pension scheme permit.
As an alternative to the purchase of an annuity, the funds may be transferred to an Approved Retirement Fund subject to the compliance with the requirements regarding a minimum income and where necessary an Approved Minimum Retirement Fund. See the separate sections on ARFs and AMRFs.
As with personal pension contracts, the Revenue exercises discretion to allow a wider range of possibilities for PRSA benefits, than the legislation expressly provides. The Revenue Pensions Manual rules broadly mirror the options for personal pension contracts.
The age at which the access may commence may be less than 60 years in the case of certain occupations, where it is compulsory or customary to retire prior to that age. Early retirement on the grounds of ill health be permitted.
An annuity may be permitted with a duration of at least 10 years irrespective of the death of the beneficiary. This may apply both to the principal annuity or a spouse’s annuity. This may be assigned and forms part of the estate on death during the guaranteed period.
In addition to certain initial disclosure requirements, the PRSA provider must provide certain information and documentation to the PRSA holder at regular intervals. Prior to entry into a PRSA contract, a preliminary disclosure certificate must be provided. This must contain a projection of future benefits. There are requirements in relation to the assumptions for contributions, fund growth, et cetera. Further statements of reasonable projection must be provided periodically.
There is a cooling up period in respect of PRSA. A person entering PRSA may exit the contract without penalty within 15 days.
A statement of reasonable projection must be provided annually. They are also required on request and on occasion of material changes to the benefits charged.
Statements of accounts must be provided at least every six months. They must contain certain minimum information, including total contributions to date, the value of the PRSA and information on the performance of the relevant investment funds.
Prior disclosure and information requirements apply where a person proposes to transfer money from an occupational pension scheme to a PRSA.
Transfers may be made in and out of a PRSA. In particular, transfers may be made from a personal pension contract and occupational pension schemes. Similarly, PRSA funds may be transferred to occupational pension schemes. This transferability is a key feature of PRSAs and is intended to facilitate a portable pension, which may be transferred through a range of employment pension circumstances.
A standard PRSA, provided by an employer under the statutory minimum requirements, must accept transfers of PRSA assets from the employee’s predecessor pension fund. No initial charges may be made. Transfers from personal pensions contracts are permissible with the consent of the parties. Transfers may be made from defined contribution schemes upon its termination. Employers are obliged to provide information on the termination of the scheme.
Transfers are permissible between PRSA contracts. Transfers may be made from occupational pension schemes to PRSAs provided that personal service under the scheme does not exceed 15 years. Prior to PRSAs, transfers were made by way of a buyout bond. This is still applicable, where individuals have more than 15 years’ service. The assets of a buyout bond may be transferred to a PRSA.
Upon transfer to a PRSA, certain documentation must be furnished to the pension beneficiary.
- statement of comparison of benefits;
- statements of the reasons why the transfer is in the holder’s interests.
The above does not apply to transfers less than €10,000 or where it is in respect of contributions, in respect of which there is no entitlement to a preserved benefit (generally two years or less).
References and Sources
Irish Pensions Law & Practice Buggy, Finucane & Tighe 2nd Ed (2005) Ch. 19
Pensions; Revenue Law and Practice (ITI) Dolan et al (2013) Ch. 3
Trustee Handbook the Pensions Authority 5th Ed 2016
Statutory Guidance the Pensions Authority (Various)
Pensions Law Handbook 12 Ed Nabarro Nathanson Bloomsbury
Corporate Insolvency 6e: Employment & Pension Rights (6th Revised edition)
Occupational Pensions (Subscription) Lexis Nexis
Pensions Law and Practice with Precedents (Subscription) Sweet & Maxwell
Sweet & Maxwell’s Law of Pension Schemes (Subscription)
The Guide for Pension Trustees World Economics Ltd
The Guide for Pension Trustees website, you can:
Tolley’s Pensions Law Loose-leaf Service (Subscription)
Pensions Act, 1990
Pensions (Amendment) Act, 1996
Pensions (Amendment) Act, 2002
Pensions (Amendment) Act, 2006
Social Welfare and Pensions Act, 2005 (Part 3)
Social Welfare Reform and Pensions Act 2006
Social Welfare and Pensions Act 2007
Social Welfare and Pensions Act 2008
Social Welfare (Miscellaneous Provisions) Act 2008
Social Welfare and Pensions Act 2009
Social Welfare and Pensions (No. 2) Act 2009
Social Welfare (Miscellaneous Provisions) Act 2010
Social Welfare and Pensions Act 2010
Social Welfare and Pensions Act 2011
Social Welfare and Pensions Act 2012
Social Welfare and Pensions (Miscellaneous Provisions) Act 2013
Social Welfare and Pensions Act 2013
Social Welfare and Pensions (No. 2) Act 2013 49/2013
Social Welfare and Pensions Act 2014
Social Welfare and Pensions (No. 2) Act 2014 41/2014
Social Welfare (Miscellaneous Provisions) Act 2015 12/2015
Social Welfare and Pensions Act 2015 (Part 3)
Personal Retirement Savings Accounts (Disclosure) Regulations, 2002, S.I. No. 501 of 2002
Personal Retirement Savings Accounts (Operational Requirements) Regulations 2002, S.I. No. 503 of 2002
Personal Retirement Savings Accounts (Fees) Regulations 2002, S.I. No. 506 of 2002
Personal Retirement Savings Accounts (Functions of Pensions Board) Regulations 2002, S.I. No. 611 of 2002
Personal Retirement Savings Accounts (Operational Requirements) (Amendment) Regulations 2003, S.I. No. 341 of 2003
Personal Retirement Savings Accounts (Disclosure) (Amendment) Regulations 2003, S.I. No. 342 of 2003
Occupational Pension Schemes and Personal Retirement Savings Accounts (Transfer) Regulations 2003, S.I. No. 429 of 2003
Occupational Pensions Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations 2003, S.I. No. 716 of 2003
Personal Retirement Savings Accounts (Disclosure) (Amendment) Regulations 2006, S.I. No. 567 of 2006
Personal Retirement Savings Accounts (Disclosure) (Amendment) Regulations 2007, S.I. No. 91 of 2007
Occupational Pension Schemes (Funding Standard) (Amendment) Regulations 2013, S.I. No. 135 of 20132