A range of organisations, possibly including some major Irish retailers, are likely to offer new Personal Retirement Savings Accounts (PRSAs) when the Pensions Bill becomes law in the first quarter of next year. The introduction of PRSAs and the establishment of a pensions ombudsman are two main elements of the Bill published yesterday by the Minister for Social, Community and Family Affairs, Mr Ahern.
Mr Ahern said the Bill was one of the Government's key commitments under the Programme for Prosperity and Fairness (PPF). "The overall objective of the Bill is the development of the pensions policy agreed with the social partners at PPF to ensure that all retired persons should have an adequate income to enable them to live with dignity and to share in the benefits of economic growth," he said.
The Bill aims to increase occupational and personal pension coverage from less than 50 per cent at present to 70 per cent of the workforce over the age of 30 during the next 10 years.
If this is achieved, it could mean another 500,000 people having pensions, said Ms Ann Vaughan, principal officer in the Department's pensions policy division.
Under the terms of the Bill, all Irish employers will be required to offer their workforces access to at least one PRSA product. The Minister said he hoped employers would provide access to more than one PRSA, but added that, if employees were unhappy with the PRSA provided by the employer, they may go to another provider.
Employers will not be obliged to facilitate such a move by their employees by deduction of contributions from salary, but the Minister said he hoped employers would provide such a facility.
PRSAs are a flexible pension option allowing employees to take their pension savings with them when they switch jobs. Contributors will be able to suspend and reactivate contributions to their accounts without penalty and charges will be capped at 5 per cent of contributions and 1 per cent of annual asset value. Employees will also be able to transfer their PRSAs between providers without charge.
Allowable contributions into PRSAs are age-related, with a cap of 15 per cent of earnings for people under 30, 25 per cent for the 30-39 bracket and 30 per cent for those over 40.
Mr Ahern hopes the Bill will become law and that the first PRSAs will be on the market by the first quarter of next year.
He said anybody who met the licence requirements would be allowed offer PRSAs and suggested that organisations such as credit unions, building societies and An Post could offer the new products. "We could see the likes of supermarkets fronting for PRSA providers, like other affinity groups," he added.
The Bill also provides for the appointment of a Pensions Ombudsman, whose decisions will be binding on complaints about financial loss resulting from maladministration of a pension scheme or a PRSA. A three-year retrospective time limit from the date of the Act is allowed for complaints to the ombudsman who can order financial redress as long as the redress is not greater than the actual loss of benefit.
Amendments to the 1991 Pension Act will reduce the vesting period for pensions from five years to two years while preservation of benefits - which extends to service since 1991 - will now extend to service before that date.
