Arthur Andersen describes the Personal Retirement Savings Account (PRSA) as a career pension. The consultancy has worked out an example to illustrate how it will benefit a modern day worker who moves from employer to employer. Michael is a computer analyst in Company X's group pension scheme.
After six years, he decides to take a year out and do a Masters Degree. He can leave his pension in Company X or transfer it to a personal retirement bond (an insurance company policy). In either case he cannot contribute any more to the pension.
After completing his degree, Michael joins Company Y and joins its pension scheme. He now has the option of transferring his Company X pension scheme into his new company scheme.
Should he decide to leave Company Y and do contract work on a self-employed basis, he can take out a personal pension scheme. However, he cannot transfer his Company Y pension scheme into his personal pension scheme and has to keep them separate.
This is an increasing problem with a growing number of people moving job several times.
After the introduction of PRSAs, the story would be simplified. On leaving Company X, Michael could transfer to a PRSA and continue to make contributions during his year out.
When he joins Company Y, he could ask it to make contributions to his PRSA instead of joining the company scheme. On leaving Company Y to do contract work, he can continue to pay contributions into his PRSA.
