If you want to start a pension, there’s a lot of information to get to grips with. One plan that’s becoming more and more popular is the PRSA - a Personal Retirement Savings Account.

Here are some of the most asked questions when it comes to PRSAs.

What is a PRSA?

With a PRSA, you can bring your pension fund with you if you change jobs, you can use one if you’re self-employed, and you can top up your existing pension. It has the benefit of income tax relief at the higher rate of 20% or 40%.

How do PRSAs work?

Simply put, it’s an investment account you can use to save for retirement. A PRSA provides retirement benefits based on what you, and in some instances your employer, put into the fund, plus any investment returns earned. Of course, like any investment, these returns can fluctuate and it’s important to keep sight of that as you could lose or gain money.

What are the benefits of a PRSA?

PRSAs have many benefits, including:

• Income tax relief on contributions
• Employers can also contribute and receive corporation tax relief
• Tax-free growth on investments
• Retirement lump sum of up to 25% of the fund with a tax-free limit of €200,000
• Choice of options at retirement: Annuity or ARF/vested PRSA
  • Vested PRSA / ARF options at retirement give the opportunity for inheritance planning and passing unused benefits to estate on death

Can I cash in my PRSA?     

If the value of your PRSA is below €650 and you’ve not contributed to it in the last 2 years, you can take money out of your PRSA.

From age 60 to 75 you can take money from your PRSA and continue working without having to retire.

In some cases, it is possible to take money out of your pension from 50 onwards. Early retirement from age 50 is available to employees who have retired from PAYE employment and are not working elsewhere either as an employee or in a self-employed capacity.

What is a PRSA contribution charge?

This is a charge you pay to the provider for managing your retirement fund and investing your money.  The amount you pay depends on whether you have a Standard or Non-Standard PRSA.

Standard PRSAs protect consumers by capping charges at:

• A maximum of 1% per annum of the value of the fund 
• A maximum of 5% of every contribution you make

A non-standard PRSA, which has no limit on charges, may suit if you wish to have more adventurous investment options.

Are employers’ contributions taken into account in a PRSA?

Yes, employers can contribute to your PRSA, which is a nice perk.

How to calculate allowable PRSA contribution in Ireland                   

Your PRSA contributions give you income tax relief at the highest rate – as with all pensions – within certain income limits.

As with all pensions, the amount you can claim in income tax relief on your pension contributions has a limit as a percentage of your earnings, depending on your age.

It’s important to note that you are not guaranteed income tax relief. To be eligible to claim income tax relief, your income must be table under Schedule E or Schedule D (Case I or II).

How do I keep up to date with how my PRSA pension is doing?

Check on your pension regularly and speak to a financial advisor at your pension provider to discuss progress and get an annual projection of the pension benefits you can expect. Most providers have online tools so you can keep a close eye on how your pension is moving along.

Tax efficient, portable, and flexible – there’s a lot to like about PRSAs. Find out more about what Irish Life’s personal PRSA pension can offer you.