What is a Personal Retirement Savings Account (PRSA)?
A PRSA is a flexible, portable, cost-efficient and easy to manage pension. A PRSA is available to anyone, regardless of employment status. It’s a portable pension that you can take with you if you change jobs. It’s flexible because you and your employer, if any, can make contributions into a PRSA and you can increase or decrease those contributions, or even take a payment holiday at any time. There are two types of PRSAs; Standard and Non-standard. There are two main differences between these. The charges relating to a Standard PRSA are capped by legislation and the choice of investment funds is wider for Non-standard PRSAs.
The benefits of a PRSA:
A PRSA is a flexible, portable, cost-efficient and easy to manage pension. A PRSA is available to anyone, regardless of employment status. It’s a portable pension that you can take with you if you change jobs. It’s flexible because you and your employer, if any, can make contributions into a PRSA and you can increase or decrease those contributions, or even take a payment holiday at any time. There are two types of PRSAs; Standard and Non-standard. There are two main differences between these. The charges relating to a Standard PRSA are capped by legislation and the choice of investment funds is wider for Non-standard PRSAs.
What happens at retirement?
One of the benefits of PRSAs is the option to take a retirement lump sum payment from your pension when you retire of up to 25% of your fund. This is tax-free up to a lifetime limit of €200,000 (and an additional €300,000 at a tax rate of only 20%*). The remaining balance can then be used to fund your retirement in the following ways:
A Pension for life (Annuity) – This is a secure retirement fund that guarantees to provide a regular income until you die. The benefit dies with you and you can’t pass it on to your estate.
A retirement fund you control – An ARF (Approved Retirement Fund) gives you control over your pension fund when you retire. Basically, you continue to invest your pension and draw down a regular income at the same time. The ARF is yours to invest and budget as you see fit (making sure it doesn’t run out) and you can pass it on to your estate when you die.