A personal retirement savings account, or PRSA, is Ireland’s 21st century pension plan. It’s the plan that works in a world where you’ll probably work for a bunch of companies through your career. It’s designed for a world where lots of us work for small companies, and the gold-plated pensions of a couple of generations ago just don’t exist anymore. So what’s so good about a PRSA?
It’s for everyone
PRSAs offer lots of flexibility. Whether you are in a job or not, you can start one, or add to one. If you are working, your employer can contribute too, and you’ll get a tax deduction on the money that goes in. For a higher-rate taxpayer, a contribution of €100 from your pay will result in €167 going into your pension pot.
You can take it with you
If you have a PRSA, you can use it as a central pot for other pensions you had before. That includes occupational pensions from previous jobs, pensions from when you worked abroad, or another PRSA.
Your money grows tax-free
Like any pension in Ireland, there’s no tax on the growth of the money in your pension pot. And when you start to access your money on retirement, you can typically take up to a quarter of the pot with no tax charge.
PRSA charges are restricted
For standard PRSAs, charges are capped at 5% of each contribution and a 1% annual fee. That’s still pretty hefty. So it is well worth searching the market to get a competitive offer on charges. Standard PRSAs must be invested in conventional funds. If you want to invest your pension pot in wackier stuff, there’s no cap on the charges and you’ll need to be more hands-on in running your pension.
When can I access the cash?
Because of the tax-free status, you have less access to your money than with a regular investment. For most folk, you can access the money in a PRSA once you hit 60 (it’s earlier if you become unable to work before then). You can mix-and-match 3 options at this point: you can withdraw the money as a lump sum, move it to a retirement fund and draw it down slowly, or buy an annuity (we’ll cover this elsewhere in the blog soon).
Where can I get one?
Your PRSA will be held with a bank, insurance company or investment firm. To access a PRSA you can speak directly with a provider, or an advisor such as Moneycube which can give insight on what’s available in the market.