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Executive Benefits Limited |
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Personal Retirement
Savings Accounts (PRSAs)
Personal Retirement Savings Accounts are new and flexible pension products which are designed to encourage more people to make adequate pension provision. They were introduced because the Government became concerned that generally people were not making adequate pension provision for themselves. They hope that the introduction of a pension product which offers low cost, flexibility, portability and easy access will encourage more people to save towards their long-term financial security. PRSAs are a welcome addition to the range of pension planning options available to you.
Benefits of a PRSA A PRSA is a very tax-efficient method of saving towards retirement. With people generally living longer and healthier lives it is more important than ever to make sure that you provide for an adequate pension income for yourself. The generous tax reliefs available to you for PRSA contributions are a great help in this regard. You are entitled to full income tax relief on your contributions to a PRSA. Put simply, if you are a top rate tax payer, for every €1 that you contribute towards your PRSA, the Government will give you back 41 cent in tax relief. There is a limit to the amount of contribution as a proportion of your income on which you can claim tax relief. If you are under 30 years of age you can claim full tax relief on a contribution of 15% of your income. If you are between 30 and 39 years of age this rises to 20%, 25% for age 40 to 49 and 30% for age 50 to 54, 35% for age 55 to 59 and 40% for age 60 and over. In addition to the excellent tax relief on your contributions, you also benefit from further favourable tax treatment. Your contributions are allowed to grow in special investment funds without being subject to tax. In addition, when you reach retirement, you can draw up to 25% of your accumulated fund out as a tax-free lump sum with the balance being drawn down as normal income.
Employer Contributions Another great benefit of PRSAs is that they can now receive contributions from an employee, an employer or both. In fact following the passing of the Pensions (Amendment) Act 2002, all employers must make at least one Standard PRSA available to their staff if: a) They have no pension scheme for their employees at present or, b) They have an employee’s pension scheme but its membership is restricted or there is a waiting period of over six months from the date of commencement of employment.
How are the contributions invested? When you contribute towards a PRSA your contributions are invested on your behalf in an investment fund which would typically be a unit-linked investment fund run by a life assurance company or some other investment manager. Most PRSAs offer you a choice of investment funds and you can switch between funds as you wish. Every PRSA must have a "Default Investment Strategy" which has been approved by the Pensions Board. The Default Investment Strategy will ensure that your fund will have a higher equity content in the early years while you are still a long way from retirement, moving to a high fixed interest securities content as you approach retirement. In other words the Default Investment Strategy ensures that the fund has an investment risk which is appropriate to your age. You can of course override the Default Investment Strategy and switch funds at any time if you so wish.
What sort of investment funds are available? There are many investment options available to you through your PRSA. Most people will choose a mixed fund called a Managed Fund. This type of fund invests in a broad mix of stocks and shares, properties, fixed interest securities (Government gilts) and cash. The mix of assets in the fund is decided by the professional investment fund managers. You can also choose from a wide range of funds through many fund managers which invest at home and/or abroad: Equity funds (investing in stocks and shares) Property funds (investing in commercial properties) Fixed Interest Securities (investing in Government bonds) Cash (investing in short-dated Government bonds and money on deposit)
Individual Quotation For further information and an individual quotation please contact us by email or phone/fax Tony Gleeson on 01-4589369, mobile 087-2570139.
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