Personal Retirement Savings Account (PRSA)
A Personal Retirement Savings Account is a long-term personal retirement account designed to enable you to save for retirement in a flexible and efficient manner. (This is especially important for people with no pension provision). Your PRSA is a contract between you and a PRSA provider in the form of an investment account. PRSAs allow you to change employment and continue to use the same PRSA. You can also switch from one PRSA to another at any time, free of charge.
Tax relief based on your age will be given by the Government for the contributions you pay into your PRSA. Employers are required to have provided access to a PRSA to employees who are not entitled to join a pension scheme within 6 months of existing service.
There are two types of PRSA:
- Standard PRSA and
- Non-Standard PRSA.
The main difference between the two is that the maximum charges under a Standard PRSA cannot exceed 5% of contributions paid and 1% per annum of the PRSA assets. There are some restrictions on the kind of assets a standard PRSA can invest in. You can read more about the differences between Standard and Non-Standard PRSAs in a Consumer’s Guide to PRSAs (pdf) produced by the Pensions Board.
Standard PRSAs are likely to meet the requirements of most people. The level of charges imposed is very important; the charges imposed reduce the fund you can build up. On your retirement, the size of your fund will depend on your contributions and the investment performance less charges deducted. It is not possible to predict investment performance.
Charges on non-Standard PRSAs are not capped and in most cases, are higher than Standard PRSAs. If you are considering a Non-Standard PRSA. You should beware of promises of better returns on Non-Standard PRSA products – predicting investment performance is extremely difficult.