PRSA's

There are two types of PRSA contract

·
A Standard PRSA is a contract that has a maximum charge of 5% on the contributions paid and 1% per annum on the assets under management. Investments are only allowed in pooled funds which include unit trusts and life company unit funds,

·
A Non-Standard PRSA is a contract that does not have maximum limits on charges and/or allows investments in funds other than pooled funds.

Who can take out a PRSA?

Employees, the self-employed, homemakers, carers and the unemployed - in fact every adult under age 75 may take out a PRSA. There is no requirement to have taxable earnings in order to pay contributions.

Contributions
Contributions may be paid to a PRSA by both an individual and by an employer, however an employer does not have to contribute. Where an individual is a member of a company pension plan and is included for pension benefits contributions to a PRSA may only be made if the plan rules do not allow for the payment of AVCs

Tax relief

Personal contributions
Contributions paid to a PRSA will benefit from income tax relief at an individual's highest rate of tax. Contributions paid by an employee via payroll will benefit from automatic tax relief and relief will also be given from PRSI and the health levies, if you pay these charges. If you contribute directly to a PRSA you will need to reclaim tax relief directly from the tax office. If you are an employee then tax relief will be given though the PAYE system as an additional tax credit. If you are self-employed tax relief may be claimed on your tax return

The maximum tax relief available in any one tax year is expressed as a percentage of Net Relevant Earnings (broadly, earnings from a trade profession, office or employment less certain allowable expenses and subject to an earnings cap of €254,000) and is set out below:

Age during tax year

Tax relief limit
Under 30
15% of Net Relevant Earnings
30-39
20% of Net Relevant Earnings
40-49
25% of Net Relevant Earnings
50 or over
30% of Net Relevant Earnings

You can pay in more than the tax relief limits set out above, but the tax relief available will be limited to those amounts.

You can claim tax relief on a contribution of €1,525 regardless of age or earnings, except where you are a member of a company pension plan. Where you are paying AVCs to a PRSA the limits for tax relief are inclusive of your own contributions to the company pension plan. These limits are also inclusive of any contributions paid to an RAC.

Employer contributions
If an employer pays contributions to an individual's PRSA the employee will be taxed on these as a benefit in kind. The employee can then claim immediate tax relief on these contributions as if he or she had paid the contributions. In practice the Revenue has stated that a benefit in kind tax charge will only arise where the total contributions paid in any one year exceed the annual limits set out above.

Investments
All funds invested in a PRSA roll-up free from income tax and capital gains tax.

Investment of contributions
When you take out a PRSA you will have a range of investment options. All PRSAs must have a default investment strategy. This is an investment option that is based on general good investment practice that invests in funds expected to meet a typical contributor's retirement savings expectations. Like most investment options there is a level of risk associated with the investments.

Benefit options


Retirement - when can the benefit be taken?
You can normally take a benefit from a PRSA when aged between 60 and 75. In certain circumstances you can take your benefits before then such as:

· On retirement from employment at age 50 or over, or
· At any time in the event of serious ill-health.

In the case of retirement due to serious ill-health you must be very ill and be deemed to be permanently unable to work.

The value of your PRSA can be transferred to:

· Another PRSA
· A company pension plan,
· An overseas pension plan in certain circumstances.

Your PRSA provider cannot charge you for transferring the value of your fund.

Contact us for a Free Initial Discussion about your PRSA requirements:

• Tel: 01-6601 016
• E: info@ifcfinance.com