What is a PRSA pension?

A PRSA pension is a personal pension plan which is held personally by the individual and is not tied to their employer. A PRSA is just a wrapper that can be thought of as a tax-efficient savings account for the money that you’ve set aside for retirement.

When money is placed into the Personal Retirement Savings Account via ‘pension contributions’, that money is then invested in one or more ‘investment funds’ that are accessible via that particular PRSA.

The PRSA holder is the person who owns the Personal Retirement Savings Account.

PRSA Ireland

Table of Contents

Types of PRSAs

The pensions authority define two types of retirement savings accounts: standard PRSA and non-standard PRSA. The main difference is the level of charges that are applied and the investment options that are entered into.

PRSA options in Ireland

Standard PRSA

The majority of people should and do take out a standard PRSA. Standard PRSAs are simplified to make investing more accessible and easier to manage.

The minimum allocation rate is 95%, mean that if you contribute €100, at least €95 must enter your PRSA. Although this protection is appreciated, it is our belief that any broker worth their salt should offer a 100% allocation rate.

The maximum annual management charge is set to 1%, this is the charge your pay the pension company to invest and manage your funds. This guideline is strictly enforced by the pensions authority.

Standard PRSAs do have limited pension investment options when compared to non-standard PRSAs. But for the majority of retail investors, this should not be an issue. Plus, you can split your PRSA contributions between the available options instead of concentrate all your investments in a single fund.

Non-Standard PRSA

Non-Standard PRSAs do not have limits on the charges that can be applied.

Therefore, careful consideration must be given towards choosing non-standard PRSAs. Non-standard PRSAs offer a wider selection of investments than standard PRSAs.

This offers more opportunity for investment returns but at a greater risk.

PRSA Performance in Ireland

Recommended article: PRSA Performance 2018 – 2023

In this article, we’re going to take a look at the PRSA offerings of five of Ireland’s largest PRSA providers.

PRSA Providers

There are 5 major PRSA providers: Aviva, Irish Life, Zurich, Standard Life and New Ireland. Each of the providers have their own PRSA funds, and you can review their pension fund performance here.

standard-life

Who are PRSAs suitable for?

First of all, it is important to note that PRSAs are available to you regardless of your job or employment status, and regardless of whether or not you pay tax.

These are people who do not have access to a occupational pension schemes through their employer.

Note: employers who don’t offer an occupational pension scheme to their employees are legally obliged to nominate a standard PRSA to facilitate their employees pension provision. In an ideal world, this would be communicated to employees, but oftentimes, it isn’t. Therefore, employees in non-pensionable employment typically have to take a proactive approach to availing of their employer’s nominated PRSA.

Key: every employee in Ireland has access to a pension through their employer by law.

It’s important to note that you, the employee, are not required to utilise the PRSA that your employer has nominated.

You can decide to set up a PRSA with whatever pension provider you choose. However, a big advantage of utilising your employer’s nominated PRSA is that tax relief on your pension contributions to the PRSA will be deducted at source (i.e. via payroll).

These people already have an occupational pension scheme, but want to make additional voluntary contributions (AVCs) to a separate personal retirement savings accounts.

Note: employers who don’t permit AVCs to be made to an occupational pension scheme are legally obliged to nominate a standard PRSA to facilitate AVCs. PRSAs are not required for AVCs where the employer permits AVCs to be made to the occupational pension scheme.

A PRSA is the most common pension vehicle for the self employed and for directors pensions in small businesses.

Note: due to the recent changes made to the tax rules surrounding PRSAs in the Finance Act 2022, PRSAs have become one of the most tax efficient ways to extract cash from a business for business owners. However, in the 2024 government budget it was announced that this will be ending in 2025.

Those who are not eligible to join their employer’s occupational scheme within 6 months of their start date. This is standard practice in many occupation schemes.

Those who are included in an occupational scheme for death in service benefits only. This is becoming less and less common.

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Tax Relief on PRSAs

Does a PRSA come with tax breaks?

A PRSA, like all pension products, offers tax relief on contributions. As it is personal to you, the level of contribution is regulated according to your personal situation. Thresholds exist for the amount of tax relief at different stages of your life.

You will receive income tax relief within the following age brackets.

What is the maximum annual tax-deductible for a PRSA? 

Everyone that takes a PRSA has a maximum amount of earnings for which tax relief is provided. It is currently set at €115,000. This is set by the Minister for Finance and is open to adjustment from time to time

Age Contribution limits of taxable earnings
Under 30 15%
30-39 20%
40-49 25%
50-54 30%
55-59 35%
60-plus 40%

FAQs

There are some differences between a PRSA and an occupational pension scheme. An occupational pension scheme is provided directly by your employer, as an employment benefit.

A PRSA, while it can be offered by an employer, is a personally-controlled pension product where you can invest your income directly without any ties to your employment. You can change employment and it will not affect your plan as it is personal to you and not a specific employer.

Many individuals who have PRSAs aren’t aware that they have control over how their money is invested within the PRSA. When a PRSA is set up, you’re automatically assigned to the ‘default investment strategy’ of that PRSA unless you decide otherwise.

In other words, if you set up a PRSA and don’t actively choose where your money is invested, then the PRSA provider will just invest your money in the default option.

The default option is typically a ‘lifestyle strategy’ whereby the mix of assets that your money is invested in automatically changes over time as you approach retirement. While default investment strategies are certainly something to consider, it’s also important to consider actively managing your PRSA investments, in order to align them with your own personal retirement goals.

You can operate a PRSA in addition to a contributory pension, this is called Additional Voluntary Contributions. This will give you additional security in retirement and increase your overall retirement pension pot. People who have a surplus of income often open a PRSA as an alternative to a savings account and to boost their pension pot.

Generally, people start drawing down income from a PRSA between the ages of 60 and 75. If you retire earlier you may be able to access funds earlier or if you experience disability or long-term illness.

It is possible to cash out your PRSA (i.e. access a tax free lump sum) from as early as age 50 in certain circumstances. This will happen where the PRSA holder opts for voluntary early retirement. In most cases, age 60 will be the age at which the PRSA holder can access his/her PRSA assets and transfer to an approved retirement fund.

If you want to find out if your pension is eligible for early withdrawal you can take our pension transfer assessment.

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