PRSA Frequently Asked Questions
A Personal Retirement Savings Account ('PRSA') is a tax efficient investment account designed to enable you save for retirement in a flexible manner.
A standard PRSA is one where you cannot be charged more than 5% on the contributions you pay and 1% a year on the funds under management; you can only invest in pooled funds, except for temporary cash holdings.
A non standard PRSA is one where there is no limit on charges and you can invest in a range of funds, including (but not restricted to) pooled funds.
A vested PRSA is a PRSA from which assets of the PRSA have been made available to the PRSA owner or any other person.
If you are a member of your company's pension scheme, and would like to make additional retirement savings, you have the option of setting up an AVC PRSA into which additional voluntary contributions (AVC) can be paid and/or transfers from existing AVC pension arrangements can be made.
ARF (Approved Retirement Fund)
A tax-exempt investment fund into which you can transfer the balance of your PRSA fund, upon exercising your retirement options after withdrawing your tax-free lump sum of 25%. This option is subject to investing the required €63,500 in an AMRF or annuity. This requirement can be waived if you have a guaranteed annual pension income of at least €12,700 (2016 level) .
AMRF (Approved Minimum Retirement Fund)
An AMRF is very similar in nature to an ARF. The main restriction is in relation to drawing down benefits. The original €63,500 invested in AMRF cannot be accessed until age 75 at which point the AMRF becomes an ARF. The AMRF holder can access up to 4% of the value of the assets each year, irrespective of age as a once-off withdrawal. Any distribution taken from the ARMF can be used to reduce the minimum distribution amount from the ARF asset in that year.
An income payable for the remainder of your and/or your spouse's lifetime, purchased with the balance of your PRSA fund after tax-free cash has been taken.
A Retirement Annuity Contract (RAC) is a personal pension plan available to individuals who are self employed or in non pensionable employment.
What is a Personal Retirement Savings Account (PRSA)?
A PRSA is a tax efficient investment account which enables you save for your retirement in a flexible manner. It allows you and/or your employer to make either regular or once-off contributions which are tax deductible. The Davy PRSA is a Non-Standard PRSA contract approved by the Pensions Board and the Irish Revenue Commissioners.
Who can take out a PRSA?
Anyone can take out a PRSA, regardless of his or her employment status. If you are a member of an Occupational Pension Scheme through your company, you can only take out an AVC ('Additional Voluntary Contributions') PRSA.
Who contributes to my PRSA?
You contribute to your PRSA. If you are an employee, your employer may contribute but is not obliged to do so.
How much can I contribute to my PRSA?
There is no limit to how much you can contribute but tax relief on contributions is restricted. Contributions paid by you and/or your employer will be combined for the purposes of determining maximum contribution limits for tax relief purposes. You will receive full income tax relief at your marginal rate on contributions within the limits set out in the table below:
|Age in Tax Year||Maximum contribution as a % of Net Relevant Earnings*|
|30 - 39||20%|
|40 - 49||25%|
|50 - 54||30%|
|55 - 59||35%|
The rate of 30% applies to certain specified occupations irrespective of age.
* Net Relevant Earnings: Earnings from a trade, profession, office or employment which are subject to income tax. Net relevant earnings are capped at €115,000 for 2015 (Part 30 of the Taxes Consolidation Act (TCA) 1997 as amended). To the extent that you pay contributions in excess of the limits above, tax relief would be carried forward to future years. However employer contributions which cause the limits above to be exceeded will be changed to tax as income of the employment.
How can I make contributions?
You can make contributions to your Davy PRSA in the following ways:
- Electronic Fund Transfer (Ad hoc or Standing Order)
- Cheque or bank draft
How often can I make contributions?
The contract is set up as a single premium contract so there is no obligation for you to pay future contributions. However, you can make a further contribution at any point in time.
Is there a maximum level of contribution?There is no maximum contribution. However, the amount of tax relief which can be claimed will be restricted to the standard age related contribution limits set by the Irish Revenue Commissioners. (see How much can I contribute to my PRSA?)
How much of my contribution is invested?
100% - there are no contribution charges.
Can I transfer in other pension benefits?
Transfers can be accepted from other pension arrangements including:
- Retirement Annuity Contracts ('RAC')
- Other PRSA
- From Occupational Pension Schemes (subject to some restrictions)
- Retirement benefits established outside of the State to the extent that transfers are permitted from that Scheme
The value of any AVCs can be transferred from an Occupational Scheme subject to some restrictions.
Can I transfer my PRSA out of Davy?
The full value of your PRSA is available to transfer to another pension arrangement such as:
- An Occupational Pension Scheme
- Another PRSA
- Arrangements for the provision of retirement benefits established outside of the State to the extent that transfers are permitted to that Scheme
There are no charges for transferring your benefits out of the PRSA.
When can benefits be taken?
You can normally start taking your benefits from age 60 (and up to age 75). In certain circumstances, you can take benefits earlier such as if you retire from employment at age 50 or over or if you can no longer work because of a serious illness or disability.
What benefits are available when I retire?
The amount of benefits on retirement depends on the value of your fund, which will depend on the level of contributions paid and the investment return earned on those contributions. The Davy Select PRSA offers flexible retirement options. You are entitled to the following benefits on retirement the first time you draw funds from your PRSA:
A once-off lump sum of up to 25% of the value* of the assets and either:
- Retain the balance of your funds in the PRSA with the option of making taxable withdrawals
- Transfer the remaining funds to an Approved Retirement Fund ('ARF')/)/Approved Minimum Retirement Fund (‘AMRF’) * refer to Definitions.
- Purchase an annuity
- Purchase an annuity for your spouse in the event of your death
- A combination of the above
*The first €200,000 of a lump sum is tax free and the next €300,000 is subject to tax at the standard rate (20% at January 2016). The balance over this limit is subject to marginal income tax (up to 40% at January 2016) and levies. For AVC PRSA, the maximum tax-free lump sum is subject to the limits applicable to your occupational or statutory scheme and limits set down by the Irish Revenue Commissioners.
What benefits are payable on my death?
If you die before you first draw on your PRSA, your PRSA fund will be transferred to your Estate tax free but could be subject to tax in the hands of the beneficiaries as an inheritance from you.
If you die after taking your benefits, the benefits payable will depend on your chosen retirement option (See What benefits are available when I retire?).
What if I change my mind?
The contract is not enforceable until a period of 30 days has elapsed from the date on which you are given a ‘Statement of Reasonable Projection’ and you may cancel this contract at any time during that ‘cooling-off’ period. If you cancel within the cooling-off period, you normally get a full refund of contributions you made to your PRSA. You may be charged if you paid single contributions and a loss incurred as a result of investment market volatility during the cooling-off period.
What information will I receive?
Before you take out a PRSA
Application form including:
The terms and conditions of the PRSA contract.
(Generic) Preliminary Disclosure Certificate.
Investment Account opening documentation and Terms of Business.
Once you take out a PRSA
- Statement of Reasonable Projection (within 7 days of contract inception)
- PRSA Certificate when a contribution is made
- Half Yearly Investment Report
- Half Yearly Statement of Account
- Annual Statement of Reasonable Projection
What are the charges?
- There are no set up charges
- There are no contribution or transfer charges
There will be
- For Davy Select Execution-Only accounts, an annual dealing charge applies for any number of transactions. This maybe, subject to overseas charges for non-Irish/non-UK listed instruments.
- Fees will vary depending on whether clients come to Davy directly or via an intermediary.
- In all cases, other charges apply. Please click here for more information on fees and charges. What are the risks? For more information on the risks of investing in a PRSA, please read the Pension Risks page.
Warning: The information contained herein is based on our understanding of current tax legislation in Ireland and the current Irish Revenue interpretation thereof and is subject to change without notice. It is intended as a guide only and not as a substitute for professional advice. You should consult your tax adviser for the rules that apply in your individual circumstances.