Personal Retirement Savings Plans Donegal

You can put in place a PRSA plan if:

• you are a resident (you live permanently) in Ireland, and you are between the ages of 18 and 75; and
• you are self-employed or in a job which is non-pensionable; or you are in employment and are a member of an occupational pension scheme and want to pay AVCs into a PRSA to boost your retirement benefits (see note below); or
• you are unemployed.

There are two charges on this plan – an entry charge and a fund charge.
Your Advisor or provider should provide these before you set the plan up.

Entry charge

There is an entry charge on each contribution you pay, which can vary depending on whether you pay a one-off or a regular contribution.

You do not have to pay an entry charge on any transfers you make from approved pension plans into your PRSA.

Fund charges

Your RSA provider will take a fund charge from your fund value every month. This covers the cost of managing your investment funds. The fund charge is 1% every year.

Government levies

Your PRSA provider will take any government levies due and pass them direct to the Revenue Commissioners. They will take these levies from your fund.

You should be provided with a preliminary disclosure certificate, which will outline the effect of the

charges on a typical PRSA.

You can choose between making regular contributions, adding a one-off lump sum at any stage or paying contributions separately. Most people tend to pay regularly.

You can pay:

• regular contributions by direct debit (every month, every three months, every six months or every year);
• one-off contributions by cheque; and
• if you are an employee, by having your contributions taken from your salary.

If you are not in an occupational pension scheme at work, we will add any employer contributions to your personal contributions.
If you start your PRSA by paying one-off contributions, you will not be able to pay regular contributions into that PRSA.

If you are a member of an occupational pension scheme at work, it is not possible for your employer to contribute to your PRSA, as contributions can only be paid by you, as AVCs.

You can transfer existing pension funds from Personal Pensions, PRSAs and occupational pension schemes into your PRSA. You can also transfer funds from pension arrangements overseas.

You will not have to pay an entry charge on that transfer contribution. You should think carefully and seek advice from an unbiased advisor before transferring funds from one plan to another.

Some restrictions apply to transfers from occupational pension schemes and overseas arrangements.

When you take out your plan, you can choose to have your contributions increase with inflation. If, like most people, you choose this option, your contributions will increase each year in line with the Consumer Price Index (a measurement of inflation), or by 5% if this is higher. If your contributions are taken from your salary, this option is not available.

Consumer Price Index (CPI) is a measure that examines the change of prices of particular consumer goods and services bought by households, such as transport, food and medical care.

If you do this within 30 days of the date you receive your statement of reasonable projection, your provider will cancel the plan. They will refund any regular contributions you have made. They will return any one-off contributions or transfers after taking off any fall in value due to market conditions and in line with Revenue rules.

After the 30 days are over, you do not have the option to cancel your plan and get a refund if the plan is not suitable. You can stop contributing to your plan at any time, but you will not usually be able to take the benefits from your plan before you reach age 60.

For tax purposes, the current maximum pension fund you can have is €2,000,000 from all sources. This is called the standard fund threshold (SFT). If you have pension funds over this amount, you will be taxed at the higher rate for income tax. This tax is taken from the pension fund before your retirement benefits are due to be paid. You should contact your Advisor for more details.

You will have to pay standard-rate income tax on any retirement lump sum between €200,000 and €500,000. Any amounts over €500,000 will be taxed as income at your marginal rate. The USC, PRSI (if it applies) and any other taxes or government levies due at the time will also be taken.

Yes, your plan provider must pay benefits under the PRSA plan in line with current Irish tax law. They will collect any taxes or government levies and pass them directly to the Revenue Commissioners. Under current Irish tax law, when you retire, you can take some of the fund as a retirement lump sum. You will have a number of options as to how you can use the rest of your pension fund. The tax you pay will depend on which one you choose. If you choose to buy a pension for life (an Annuity), your income will be taxed as income in the normal way. If you invest in an ARF or continue to invest in your PRSA or as a vested PRSA, you will have to pay tax on any withdrawals that you make.

If you are self-employed, you can take your benefits from age 60. You do not have to retire to take your pension benefits. Some occupations allow you to take benefits earlier, such as pilots, fishermen, jockeys, professional rugby players, singers, check this with your Advisor. 

If you are an employee and you are not a member of an occupational pension scheme, you can take your benefits at any time after your 50th birthday. If you do this between age 50 and 60, you must retire from your job.

From age 60 you can continue to work and take your benefits at the same time. If you are a member of an occupational pension scheme at work and have paid AVCs into a PRSA, your retirement age must be the same as the retirement age under your pension scheme at work.
Your plan provider will also pay benefits in line with your main scheme. You will need the permission of the trustees of your work scheme to take your benefits. This may mean that you will need to retire so you can take benefits before the scheme’s normal retirement age. If you need to retire because of ill health, it is possible to take benefits earlier than shown above.

If a transfer is paid into this plan and was granted to you under a pension adjustment order, the earliest retirement date will not be based on your date of birth, but will be based on your former husband’s, wife’s, registered civil partner or qualified cohabitant’s date of birth and their employment status at the time of transfer.

You must take your pension before your 75th birthday. If you do not, your PRSA will automatically become a vested PRSA. If that happens you will have no access to the pension. No retirement lump sum will be available, no withdrawals are allowed from the plan, and you will not be able to transfer to an ARF or use the fund to buy a pension income for life. If you have not taken your pension before age 75, you will have 30 days to complete a Benefit Crystallisation Event (BCE) Certificate or as required, the plan provider will deduct income tax at the higher rate (currently 40%) from your pension fund and pay it to the Revenue Commissioners.

Important Note: If your PRSA becomes a vested PRSA at age 75, you will have no access to your pension benefits.

If you stop working but do not plan to begin taking benefits, you can either:

• stop contributing to the plan (perhaps until you start working again); or
• continue to contribute to the plan. If you continue to contribute, income tax relief on the contributions may have to be carried forward to when you have earnings in the future.

If you have to retire early because of ill health, you can take your pension benefits immediately. However, your pension may be low because your contributions are stopping at an earlier age and the pension will have to last longer as you will be retiring earlier.

If you retire early because of ill health, you must provide medical evidence to support this. The definition of ill health in Section 787k of the Taxes Consolidation Act 1997 is you are “permanently incapable through infirmity of mind or body of carrying out his or her own occupation or any occupation of a similar nature for which he or she is trained or fitted”

At age 75 your PRSA will automatically become a vested PRSA. If you have taken your retirement lump sum and decide to continue investing through your PRSA, your plan will become a vested PRSA. Your PRSA will also become a vested PRSA at age 75 whether you have taken your retirement lump sum or not.

The plan provider will pay the value of your vested PRSA to your estate when you die.

Your dependants may have to pay tax depending on who inherits the funds. If you leave the funds to your husband, wife or registered civil partner, they can transfer the funds to an ARF in their own name.

In all other cases, your plan provider will pass the funds to your estate. If your estate has to pay income tax, they must take this off before paying the proceeds to your estate. Generally, the amount is treated as income for the year of your death.

There are a number of exceptions to this rule.

Income tax is not due if:

• the funds are transferred to an ARF in your husband’s, wife’s or registered civil partner’s name (however, PAYE is due on any future withdrawals); or
• the funds are transferred for the benefit of your children who are under 21 on the day you die.

Income tax will be due at a rate of 30% if the value of your vested PRSA is transferred for the benefit of any of your children who are over 21 on the day you die.

As well as income tax, if your vested PRSA is not paid to your husband, wife or registered civil partner, or to any of your children over age 21, there may also be capital acquisitions tax (CAT) due on the value of your plan. The beneficiaries are responsible for paying this tax. Irish tax law changes over time and you should get independent tax advice on this.

If we take your personal contributions from your bank account, you can apply to your inspector of taxes to have your tax credits adjusted to reflect your pension contributions. You can do this your Revenue My Account.

If your contributions are paid from your salary, you will receive immediate income tax relief. Any employer contributions will receive corporation tax relief in the year the contribution was made.

If you are self-employed, you must include your pension contribution in your self-assessment tax returns to get income tax relief.

Income tax relief is not currently available on net relevant earnings which are more than €115,000 including contributions to other approved pension arrangements.

For certain occupations you may get tax relief of 30% of your earnings, no matter how old you are. In general, these tend to be professional sportspeople who earn their income from that occupation.

If you are self-employed while paying into a PRSA and then move into a job which has a pension scheme, your contributions into your PRSA either should end or become additional voluntary contributions linked to your main scheme.

The way you make your contributions could change (for example, from direct debit to payroll deductions) and you should let your advisor and or plan provider know.

If you are employed in a job which does not have a pension scheme and then become self-employed, you can continue your contributions as normal.

If you move into a job which has a pension scheme, your contributions into your PRSA either should end or become additional voluntary contributions linked to your main scheme.

The way you make your contributions could change (for example, from direct debit to payroll deductions) and you should let your advisor and or plan provider know.
If you are a member of an occupational pension scheme and are paying AVCs into a PRSA but leave that job, your contributions can continue but they will become ‘ordinary’ contributions unless you join another job with a pension scheme.

This may mean changing how your contributions are made from a payroll deduction to direct debit from your personal account. If you move from a job with an occupational pension scheme, to another job with an occupational pension scheme, the payroll system will change from the old employer to a new employer.

Your plan provider can only do this if you let them know immediately. It is important to let your plan provider know about any change of your employment so they can pay out the correct benefit to you when you retire.
So, changing your job does not mean that you have to stop paying into your PRSA. It just means that you may have to change the way you pay your contributions, and you should let your advisor and or your plan provider know as soon as possible. There may be restrictions on paying AVCs into some occupational pension schemes.

In most cases you will only be able to access your PRSA between ages 60 and 75, or due to early retirement. If you are a member of an occupational pension scheme at work and are paying AVCs into your PRSA, you have to take benefits at the same time.
It may be possible to cash in the value of your plan if it is €650 or less and you have not paid contributions into your PRSA in the two years before you ask to cash it in.
If the value of your fund is €650 or less and you do not pay any more contributions into it for two years, the plan provider has the right to ask that you transfer your fund to another approved pension scheme or start to pay contributions again. They will write and tell you about this. If you don’t response to the plan provider within three months of this request, they could decide to automatically refund the value to you.

Yes, you can transfer your plan to another approved PRSA provider at any stage. You can also transfer your assets to an approved occupational pension scheme if you are a member of that scheme and the trustees are willing to allow this.

You may also be able to make a transfer to a 49 approved pension arrangement outside the state. Some restrictions apply to transfers to pension arrangements overseas.

Your plan provider should not charge you for transferring out of the PRSA unless you are in a fund which restricts you from leaving before an agreed date. They may also set a delay period before a transfer can take place.

You will have to pay income tax, Universal Social Charge and PRSI (if it applies) on transfers to an overseas pension scheme. You should check with your advisor if this applies to your chosen fund.

If you are involved in a judicial separation or divorce or dissolution of a civil partnership or ending of a relationship with a qualified cohabitant, a pension adjustment order may be granted by the court. There is no option to set up an independent benefit within this plan.

A pension adjustment order issued by the court will override the terms and conditions of your PRSA plan. This will direct your plan provider to pay all or part of the benefits under this plan when you retire or die, to any person named in the pension adjustment order.

If a pension adjustment order has been granted on your plan, you must let your advisor and or plan provider know. You can get more information on how a pension adjustment order works from your solicitor or from the Pensions Authority at the following address

The Pensions Authority, Verschoyle House, 28-30 Lower Mount Street, Dublin 2.
 Phone: 01 613 1900 Email: [email protected] Web: https://www.pensionsauthority.ie/en/