Personal Retirement Savings Account (PRSA), the new flexible pension, received a broad welcome from employers, pension providers and other industry players yesterday. The new framework represents a major simplification of the current legal structures surrounding pensions. The consensus is that it will be better suited to a modern mobile workforce.
IBEC welcomed the flexibility of the new product and its ability to offer an effective pension arrangement on simple and transparent terms, with minimum fuss and red tape.
The employers' group questioned the impact of the new Government savings scheme on PRSAs. Speaking yesterday, the Minister for Social, Community and Family Affairs, Mr Ahern said he accepted there was an overlap but did not accept that they were two competing products.
"The Government savings scheme is a short-term product with a one-year window, while the PRSA is long-term and has the benefit of tax relief and the possibility of employer contributions."
PRSAs will be divided into two categories - the Standard PRSA, which will be an off-the-shelf product and the Non-Standard PRSA which will include more sophisticated facilities. Charges on the Standard PRSA have been capped at 1 per cent of the annual asset value and 5 per cent of contributions. No flat charges are allowed.
The managing director of Hibernian Life and Pensions, Mr Grant Barrans said he felt the charges were realistic and that providers would be keen to come forward with competitive products. "If the detail backs up what we have heard so far, this will be a real step forward for pensions coverage. We will be interested to see how much the regulatory requirements complicate the structure."
Mr Declan Lawlor of Irish Life said the PRSA framework was by and large what the company expected. He said issues around the regulation and administration of PRSAs would need to be ironed out to establish how viable the products would be.
Mr Lawlor expressed concern about the low entry level for the PRSA - £240 (€305) per annum. He said this might prove to be an expensive provision.
The chief executive of the Pensions Board, Ms Anne Maher, said the PRSA was a landmark in Irish pensions as existing arrangements did not suit many people with irregular working patterns.
"The PRSA is consumer friendly and geared toward the individual. It has to have a low entry level to reach the target groups that are not covered at the moment."
Ms Maher said she expected mandatory access to make a big difference as every employer would be obliged to consider pensions options for employees. Only 10 per cent of employees in firms employing less than five people currently have access to a company pension.
One of the key recommendations of the Pensions Board in its report on the National Pensions Policy Initiative was the introduction of the PRSA. It is hoped the new retirement savings vehicle will facilitate an increase in supplementary pension coverage from less than 50 per cent to 70 per cent.
The first PRSAs are expected to appear in early 2002.
