A personal retirement savings account (PRSA) is a type of personal pension plan launched in 2003 to boost the level of private pensions take-up in the State.
While PRSAs are available to anyone, regardless of their employment status, they are aimed in particular at employees who do not have access to an occupational pension scheme through their employer.
SSIA holders thinking about rolling their lump sum into a pension can do so with a PRSA, either through the Government pension incentive scheme or directly (claiming the normal tax reliefs).
PRSAs are sold mainly by insurance companies and are portable, which means that they can be carried from job to job or transferred from one provider to another without attracting a penalty.
In order to make PRSAs more affordable than traditional personal pensions, charges were capped on standard accounts at 5 per cent of contributions paid and a 1 per cent annual management charge, while the minimum contribution was set at €300 a year. However take-up of PRSAs has fallen short of expectations, with just over 95,000 taken out by the end of 2006.
According to Alan Morton of Moneywise and www.retirement.ie, the main reason PRSAs have not taken off as anticipated is the lack of employer input. Although it is possible for employers to make contributions to an employee's PRSA, there is no obligation on them to do so.
"A lot of people would access PRSAs through their employer and very few schemes have an employer contribution into the PRSA. When there's no employer contribution, you tend to find very few staff members bother paying anything in," Mr Morton says. "PRSAs were meant to simplify the entire pensions world. All they've done is added an extra layer of complexity."
While PRSAs are worth considering by self-employed people, he advises them to look closely at the market and weigh up PRSAs against other personal pensions.
"Part of the rationale for bringing in PRSAs was that they capped charges, but what you often find is that you can get lower charges on a [ traditional] personal pension."
