PRSAs can get complicated, but truth be told, many of us have the same questions.  Moneycube is here to help with our FAQ! From the benefits of a Personal Retirement Savings Account, to withdrawing it, and everything in between, here’s Moneycube’s rundown of everything you ever wanted to know about PRSA pensions in Ireland… but were afraid to ask.

Got a question to add?  Email us and we’ll add it to the list!

What is a PRSA?

A Personal Retirement Savings Account is a highly flexible, tax-protected pension account that anyone can open.  You can get income tax relief on your contributions and can start, or stop your contributions at any point.  On top of that, the charges are capped by law, and you can bring your account with you when you change jobs.

Do I need a PRSA?

Well, you need a pension of some kind!  A pension will replace your salary when you stop working, rather than relying on the State pension alone.  PRSAs are the simplest kind of pension in some ways, but there may be other options that are cheaper or more appropriate for your situation. Talk to us to find out.

What’s difference between a PRSA and a pension?

A PRSA is just one of several pension types in Ireland. It’s well-known because anyone can get one, and the investment options are fairly simple.  There are other kinds of pension which can be more appropriate if you want to retire early, move a pension from an old job, or enjoy lower costs, for example.

What happens a PRSA when I retire?

Typically when you retire, you can take up to 25% of your pension as a lump sum.  The first €200,000 of the lump sum is tax-free, and the rest is taxed at 20%.  The remaining three-quarters of your pension is usually invested (in an Approved Retirement Fund, or ARF, or sometimes an annuity) to pay you an income in retirement.

What are the benefits of a PRSA?

A PRSA is useful because it offers a simple investment range, clear charges, and your employer can pay in to it too.  What’s more, you can take a PRSA with you when you leave your job, and you get all the normal tax benefits of a pension: income tax savings on the money you add, tax-free investment growth, and a lump sum on retirement.

How does a PRSA work?

Your advisor or employer will typically set up your pension for you.  You, and your employer, can pay in a fixed amount each month, and add lump sums from time-to-time.  The money is invested in assets with scope for long-term growth, to provide you with an income in retirement. We can help you start a PRSA.

How much should I put in to my PRSA?

Putting as much as you can reasonably afford will save tax and increase your income later in life. But getting started is often the hardest bit. And it’s more important to make a start on your pension, than to try and fix it in one go. Take a look at our pension calculator to see how.

Can I take money out of my PRSA?

Once money is invested in a PRSA, it’s not possible to withdraw it until retirement. Typically you can’t take money out of a PRSA until age 60.  There are exceptions for situations of extreme ill health, but for most people, it’s not possible to access the money earlier.

When can I cash in a PRSA?

The earliest age you can cash in a PRSA is generally 60.  Of course, the earlier you start to draw down the benefits, the longer the period you will have to spread it out over.  Most people cash in pensions when they retire from their job – perhaps at the same time as the State pension (ie age 66 or older).

What’s the latest I can cash in a PRSA?

You must draw down a Personal Retirement Savings Account before your 75th birthday.

What’s a Standard PRSA?

A Standard PRSA is a kind of pension with limits on charges and investment options. Standard PRSAs have a maximum charge of 5% on the money paid in, and a maximum charge of 1% per year on the funds itself. Investments are only allowed in pooled investment funds.

What’s a Non-Standard PRSA?

A Non-Standard Personal Retirement Savings Account differs from a Standard one in that there are no limits on charges, and no limitations on the funds into which you can invest?

What’s the best PRSA for me?

For most of us, a pension that invests into professionally managed investment funds which are appropriate for our risk-reward profile is the best PRSA option. In general, PRSAs from a mainstream investment provider, at a good-value charge, are best.  But there are many options, and everyone’s situation is different, so it’s worth finding out what’s right for you, whether you’re starting a pension, changing job, or retiring.

What are the risks of a PRSA?

The main risk with any pension is that it fails to provide enough income for you when you come to retire.  A good advisor will help you select an investment fund that’s appropriate for your circumstances, and guide you on how much you should put in.

Do you have a PRSA calculator?

We do! Try our pension calculator to get an idea of what’s right for you.

Can I transfer a PRSA if I change job?

Yes, certainly. PRSAs are very flexible in this way. You can move your account into a new work pension if you change job. You can move old pensions into your PRSA, or consolidate many pensions into a single one, or indeed split your pension into several PRSAs, for example to stagger lump sums in retirement.

Who can start a PRSA?

Almost anyone can start a PRSA. You can pay into it yourself (and receive income tax relief on the money you put in), and your employer can also add money.

Do I need a job to start a PRSA?

You don’t need to have a job to start a Personal Retirement Savings Account.  But if you don’t have an income, you’ll be missing one of the key benefits: saving income tax on the money you put in at your top rate of tax.

 

Additional government information on PRSAs: Read on 

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