How it Works
When you have your own PRSA, you can save for your retirement by making regular monthly contributions to your pension. What is especially important is that your employer is also able to make contributions into your pension, should they wish to. You can choose which funds your money is invested into – and you are able to track the performance of different available bonds, shares and property markets.
As with all pension products there are significant TAX-SAVING benefits: you will benefit from tax relief on your contributions, at your marginal income tax rate. When you are ready to retire, your PRSA gives you 25% of your funds TAX-FREE.
- Substantial tax-savings on your contributions – the money you put into your plan is TAX-DEDUCTIBLE. The tax relief you receive depends on your age, and the older you get, the greater your tax relief.
Your Age Percentage (%) of earnings* Under 30 15% 30-39 20% 40-49 25% 50-54 30% 55-59 35% 60 and over 40%
- Always flexible – you decide how much you want to contribute – and you can also stop and restart whenever you wish, without being penalised.
- Cash plus income for life – when you retire (normally between the ages of 60 and 70), the FULL ACCUMULATED VALUE OF YOUR PENSION is paid out to you as retirement benefits: a CASH LUMP SUM plus a monthly income for the rest of your life through an annuity.
- Tax-free growth – any growth your investment achieves is TAX-FREE, yours to enjoy in retirement.
- Simple and transparent – a PRSA is clear, easy and straightforward, with no-small-print charges.
Quick Q and AQ. Should all employers have a PRSA option? A.Most definitely yes, all employers are obliged to offer the PRSA option to staff if they do not offer membership of a pension scheme. They must do so within 6 months of an employee’s service. Q. What happens if my employer wants to contribute to my PRSA? A. Your employer is free to contribute into your pension and these are treated as a ‘benefit of kind’. This means that if you contribute 5% of your earnings, and your employer contributes 10% – your total contribution is seen as 15%. Q. Is there a limit to how much I can contribute to my PRSA? A. The maximum regular contribution you can pay into your PRSA is €5,000 a month, €7,500 every three months, €15,000 every six months, or €30,000 per year. The minimum yearly contribution you can make into this plan is €300. Q. What happens when I retire? A. When your pension pays out come retirement, you have a number of choices. You can take some of the capital as a cash lump sum – 25% of which is TAX-FREE. The rest of the funds can then be used to:
- buy a pension (or annuity) for life – an income paid each month in place of a salary.
- invest in a fund called an Approved Retirement Fund (ARF). You can then withdraw from the fund whenever you need to.
- draw a taxable cash sum.