The PRSA was conceived as a replacement for Personal Pensions. It was originally intended by the Pensions Board that following the launch of the PRSA in 2002, that Personal Pensions (RACs) would be phased out. However it has not quite worked out like that, with the personal pension continuing to co-exist alongside the PRSA.
Much of the reason for the continued existence of the RACs is down perhaps to the approach of the larger life companies who tend to not be fans of the more onerous disclosure requirements attaching to PRSAs.
That is a pity because the PRSA offers significant advantages over personal pensions. Let us look at some of these key advantages:
- Transfers - The PRSA can receive transfers from occupational pensions and can also transfer to an occupational pension. That is a huge plus compared to personal pensions which are quite restricted from a transfer perspective.
- Post Retirement - The PRSA can be used to both accumulate a pension fund and later to pay it out. There is no post retirement mode for RACs.
- Transfer Costs - By law there can be no transfer costs associated with a transfer of pension assets into or from a PRSA. However there may be transfer charges on transfers from a personal pension
- Preserved Benefits - Both PRSAs (prior to vesting) and RACs offer a preserved benefit which can go without deduction of tax to the estate of a pension holder on their demise.
- Beneficial Owner - The Pensions Act Sec 98(1) makes it clear that “a contributor to a PRSA shall be the beneficial owner of the PRSA assets of that PRSA”. No such provision exists for personal pensions.
In conclusion when we look at the above it might be difficult to justify choosing a personal pension over a PRSA.
