Why PRSA's are still relevant

The introduction of imputed distributions announced in November’s budget caused some concern to fans of the PRSA. The Memorandum published by the Department of Finance immediately after the Minister’s Budget speech proclaimed that income tax should now be paid on 5%/6% of PRSAs post retirement but also that the tax should be calculated on the aggregate value of all of an individual’s PRSAs once benefits were taken from just one of them. 

The proposal led some advisors to state that the PRSA was no longer a useful vehicle to hold pension benefits. The clarification provided by Finance Bill 2012 that the imputed distribution would only apply to post retirement assets brought some relief.

However, for many reasons we still see the PRSA as a useful and flexible vehicle for pension planning, even after the introduction of the imputed distribution. Here are a few reasons why:

1. There is no imputed distribution where the PRSA investor has not drawn down benefits.
2. Income from UK property held in a PRSA, as opposed to an ARF, can be taken tax-free.
3. Where no benefits have been accessed, the fund goes to the PRSA holder’s estate tax-free. In the same circumstances, benefits of an occupational pension scheme have to be spent buying an annuity for dependants.
4. The PRSA allows you to consolidate personal pensions and frozen occupational benefits and facilitates the transfer of benefits from a personal pension to an occupational pension scheme.
5. The PRSA offers statutory protection against creditors, the ARF does not.
6. The PRSA allows you to split benefits which allow significant planning opportunities.
7. A PRSA investor who is also a 20% director and who wishes to retire before Normal Retirement Age is not compelled to sell his/her shareholding of the employer company.
8. A PRSA investor can continue to contribute until age 75, no matter whether benefits are taken or not.
9. The PRSA is the most carefully regulated pension product in the country, thus meeting the demands of the ever more attentive pension client.
10. The PRSA is still the only pension vehicle which allows all types of contributors; the employed, the unemployed, those without Schedule D or E income.

We will of course continue to keep you updated with developments in the Pension’s area as the finance bill runs through the houses of the Oireachtas.


More information on ITC's PRSA here.

Part 4: Transfers - to and from a PRSA

One of the great benefits of the PRSA as a pension vehicle is its ability to interact with other pension products in terms of transfers. Here are some of the things it can do:

Occupational pensions

1.   Transfer to an occupational pension scheme is possible subject to the trustee’s consent.

2.  Can receive a transfer from an occupational pension scheme provided the period for which the individual has been a member of the scheme is 15 years or less and benefits have not become payable. The 15 year restriction does not apply to AVC transfers. Certificate of Comparison and Written Statement required.

Personal Pensions

3.   Can receive a transfer from a personal pension subject to the rules of the personal pension.

4.    A personal pension cannot receive a transfer from a PRSA.

Approved Retirement Funds

5.    At the point of retirement, a PRSA holder can elect to take their lump sum and transfer to an Approved Retirement Fund. However, once having elected to ARF, the client cannot transfer back to a PRSA.

Vested and Non-vested PRSAs

6.    A non-vested PRSA can move to another non-vested PRSA without any restrictions or charges being incurred.

7.    Revenue have recently confirmed that a vested PRSA can move to another vested PRSA.

Buyout Bonds

8.    Transfers from and to a buyout bond are not permitted.

International Pensions

9.    PRSAs have specific provisions facilitating transfers to or from pension schemes outside the State.

We will expand on some of the points above in later blogs in the series but what is clear from the above is that the PRSA is the ideal pension vehicle not only for its transferability but also as a vehicle for consolidation of a client’s domestic and international pension arrangements.

Paul Gilmer