PRSA

Financial Architects deal with Aviva, Friends First, Irish Life, New Ireland and Zurich for PRSAs in the Irish Market and we specialize in this area. We are fully qualified financial advisors, we have a diploma in pensions and together with our experience and professional qualifications will make it easier for you to understand and increase your retirement savings over the next many years.

It is very likely that you will live to retirement age, will be in reasonable physical shape and will have another 25 to 30 years to live, so in order for your income not to collapse, you need to plan ahead. If you have no plan, the more you earn, the bigger the drop will be at retirement.

Warning: The value of investments may go down as well
as up. The income you get from investments may go down
as well as up. Investments may be affected by changes in
currency exchange rates.

Warning: These figures are estimates only. They are not a
reliable guide to the future performance of this investment. The
value of your investment may go down as well as up. Benefits
may be affected by changes in currency exchange rates.


In 2007 we experienced a significant change in pension fund values as markets collapsed during the Financial meltdown of the credit crunch, however if you were advised properly we believe you would have avoided the huge drops that took place. Like wise when markets bottomed in roughly St Patricks day 2009, this represented a great opportunity to get back into the market to prepare for the sharp rebound that took place (Some pension fund values actually doubled in one year).

Read on for basic explanations of PRSAs

Personal Retirement Saving Accounts (PRSAs) are flexible, portable, low-cost, transparent pensions. Anyone can take out a PRSA regardless of employment status. You and your employer, if any, can make tax-free contributions to it, you can take it with you if you change your job or employment status, and you can stop and start making contributions at any time.

There are two types of PRSAs, Standard and Non-standard. One major feature of a Standard PRSA is that the charges are limited by legislation. You can find details of the charges applicable to you from your financial advisor or PRSA provider.

The fund choice is somewhat wider for Non-standard PRSAs and the full
choice of funds available for Standard and Non-standard PRSAs is something we can advise you on.

The longer you save, the larger your retirement fund will be. The earlier you start, the easier it is to fund for your target pension. Clearly, it makes a lot of sense to pay contributions for as long as possible. The following table shows the difference that delay can have.

You have the option of transferring the assets of your PRSA to another PRSA or pension scheme, subject to such conditions as may be prescribed by the Revenue and the Pensions Board. Providing that the parties involved agree and the relevant legislation is complied with, your PRSA may receive transfers of assets from another PRSA or pension arrangement. There are various limitations on transferring assets from an occupational scheme into a PRSA and we can help you go through the options. Pension produced by 20% contribution*

The great thing about saving for retirement is that the taxman gives you a really good deal.

Any growth in the value of your fund is tax free, eg if you started in 2005 with €0 and by 2055 you have saved €1,000,000 there is no tax payable on the growth ie €1,000,000 is not subject to capital gains tax.

It is important to note that there are limits relating to the amount of tax relief that is available, so for example if you are aged 38 and earn €40,000 a year after tax, you can claim tax relief on any pension payments you make up to 20% of your income, ie €8,000. The tax relief is 35% of the payments made up to €8,000, so you would get €2,800 tax relief.

Check your age and the percentage of your income that you can claim tax relief on.

Up to 29   15%
30 to 39    20%
40 to 49    25%
50 to 54    30%
55 to 59    35%
60 plus     40%

If contributions are deducted from your salary by your employer, relief against income tax and PRSI will be given immediately; otherwise, you will need to apply to your Inspector of Taxes and the PRSI Refunds Section, Sarsfield House, Limerick. A person not in the workforce would not be able to claim tax relief. Contributions paid while out of the workforce, however, may be carried forward and claimed against future earnings on return to paid employment, subject to the annual limits.

Your fund will be paid free of income tax to your estate if you die before drawing your retirement benefits; inheritance tax, however, may still apply.rele

The Default Investment Strategy (DIS) is an automatic mechanism that gradually transforms your pension fund from a higher-risk portfolio to a lower-risk portfolio as you approach retirement with some pension providers. This protects you from the impact of a stock market crash prior to retirement.

It will be chosen for you if you make no choice as to your investment preference. A DIS is designed to fulfil the reasonable expectations of a typical investor for the purposes of saving for retirement earnings*

The DIS invests contributions in a PRSA fund with a reward/risk profile that is suitable to the number of years remaining to your selected retirement date. With a longer period to retirement, we believe that you should invest in funds with the potential for higher returns, even though these funds are more inherently risky. As you approach retirement, however, we recommend that your PRSA moves into a more stable investment to protect the investment performance achieved to date.

Most people invest too conservatively, so a DIS will take more risk if you are younger that Someone approaching retirement that will not want the risk of losing large amounts of their pension which they may never get back.

Five years before your selected retirement date, monies invested in higher risk assets will be gradually switched into more secure funds – a proportion of the value of each fund will be switched each month into this secure fund, the reason a full switch is not favoured is if you are transferring in after a market collapse, you are crystallizing the loss, whereas if you do it gradually you will even out the market highs and lows.

Remember that return and risk are related; normally, the higher the potential return, the higher the potential risk.

There is a limit to the size of pension funds and on the size of the tax-free lump sum that can be taken at retirement. The maximum value of total pension funds is €5.418 million in 2009. If your pension funds exceed this at retirement, you will have to pay tax at 41% on the excess. Subsequent drawdowns will also be subject to income tax and the health levy.

Recent legislation has opened up better options for retirees to handle their pension as they want.

Instead of having to choose an Annuity (Fixed pension for life) you can now get the ARF option

An annual tax is payable on the value of an ARF, called an 'imputed distribution'. This tax applies where the ARF holder is 60 years of age or older for the whole of the tax year, and amounts to income tax on a deemed withdrawal of 3% of the fund value, every December 31st. Any actual income or encashment taken from the ARF or AMRF during the year may be deducted from the deemed withdrawal for the purpose of calculating tax. If the actual withdrawal equals or exceeds the deemed withdrawal, then no further tax is payable in relation to that particular year.
The ‘deemed withdrawal’ rule does not currently apply to continued PRSAs.

Tax implications of passing on an ARF/AMRF or Continued PRSA
On death, any funds held in an ARF or continued PRSA in your name are payable to your estate. You are free to bequeath them to whomever you wish. The tax treatment of the fund depends on who inherits the funds. If the ARF or continued PRSA is to be transferred to an ARF or continued PRSA in your spouse’s name, or in cash to children under age 21, there is no income tax to be paid. If monies are transferred to a spouse in cash, income tax is payable as if the monies had been withdrawn by the deceased ARF or continued PRSA holder. If monies are transferred to children aged 21 and over, tax is payable at the standard rate (currently 20%). Tax is due at the deceased’s marginal rate if the assets are transferred to any other persons. Capital Acquisitions Tax may also be payable, unless the monies are paid to a spouse or to children aged 21 and over.

Every six months, you will receive a statement that will inform you of the contributions that you have made over the previous six months. You will also be told the value of your PRSA assets at the end of the period. Please note that these statements may be required by your Inspector of Taxes.

Every six months, you will receive an investment report outlining information on the investment performance of your funds.