PRSA

A Personal Retirement Savings Account (PRSA) is a personally owned pension that gives you the opportunity to save for retirement. You have the ability to contribute whenever you like on a regular or irregular basis. You may also stop your contributions at any time.

• Benefit from tax relief at your marginal income tax rate (20%/40%).
• Full control over your investment strategy.
• PRSA assets grow free of capital gains tax and income tax.
• Ability to plan how retirement benefits are taken.
• Potential 25% tax-free lump sum.

PRSAs are flexible with regard to contributions. The policy owner may solely contribute or in some cases, an employer may decide to contribute.

Yes. There are both standard and non-standard PRSAs. There are some important differences between the two surrounding charges and fund choices.

A standard PRSA is one where you cannot be charged more than 5% on your contributions. You must also pay under 1% per year on annual management fees. There are also restrictions as to where you can invest your funds.

A non-standard PRSA is where there are no limits on the charges and you can invest in a wide range of funds. A non-standard PRSA will also provide access to a wider range of fund choices such as:

• Cash
• Bonds
• Equities
• Property
• Alternatives

A vested PRSA refers to a PRSA where the policyholder has drawn down their lump sum and leaves the balance of their funds in a PRSA. Following drawing down their lump sum, if the policyholder does not have a guaranteed €12,700 per annum, the must ‘ring-fence the first €63,500. Vested PRSAs are subject to the same rules as an ARF with regard to deemed distributions. Reading our AMRF page may also be helpful.

Yes. A PRSA is no different from any other pension arrangement and will be eligible for full tax relief benefits. This tax relief will be based on your age and contributions along with your income bracket.

Although there is no limit as to how much you can contribute, tax relief on contributions is restricted to certain thresholds.

You will be eligible to receive income tax relief at your marginal tax rate on contributions within the following table:

If an employer makes a contribution to an employee’s PRSA on behalf of the employee, then these contributions are treated as a benefit in kind.

Contributions will also be combined. For example, an employee contributes 5% of their earnings, and the employer matches this 5%. This is treated as making a 10% total contribution.

If you already have a PRSA set up, contributions can be made through Electronic Fund Transfer (ETF). Some are regular direct debits while others may be more ad hoc.

You may transfer benefits from the following arrangements:

• PRSA to PRSA
• Occupational Scheme to PRSA (subject to scheme restrictions)
• Retirement Annuity Contracts (RAC) to PRSA

In most cases, you will be able to access your PRSA benefits from age 60. However, in certain circumstances you may be eligible to take benefits earlier should you retire from employment or are no longer able to work.

The amount available to you will depend on the value of your fund. This in turn will depend on the level of contributions made combined with the overall investment performance. Most will be entitled to a once-off lump sum payment of 25% tax-free.

The first €200,000 of a lump sum is tax-free and the following €300,000 is subject to tax at the standard rate of 20%. The balance over this amount is subject to a marginal income tax of 40%.

If you die before your first drawdown of your PRSA, your fund will be transferred to your estate tax-free. However, beneficiaries could be subject to inheritance tax.

If you happen to die after taking your benefits, the benefits payable will depend on your chosen retirement option. If you need clarity on this it may be worth speaking to an advisor.

We would be happy to guide you through the process of setting up your PRSA. Our advisors have many years of experience and offer complimentary consultations. You can book your consultation or contact us on 01-890 3518 to begin the process.