A quick overview of PRSAs (Personal Retirement Savings Accounts) in Ireland.
What is a PRSA?
A PRSA is an investment account for retirement savings, funded by employer or personal contributions, or transfers from other pensions (e.g., occupational pensions).
PRSAs are special because you're free to switch to a different provider at any time. When switching, you simply move all your PRSA funds from your current provider to the new provider. Like switching utility providers, this can help you save money on fees, get better service, and access investment options that best suit your needs.
PRSA fees
PRSA fees come in two main parts:
- Contribution Charge: An upfront fee deducted from contributions (e.g., 5%). 'Allocation' refers to the remaining amount (e.g., 95%).
- Annual Charge: An annual fee based on your pension fund's total value (also called the 'Fund' charge).
Standard PRSAs have legal fee caps (max 5% on contributions, 1% annually). Non-Standard PRSAs have no caps. Additional fees apply for brokerage-style PRSAs. There are also (typically small) costs at the product level. Compare Irish PRSA pension fees here.
Types of PRSAs
PRSAs differ along two independent dimensions:
Dimension 1: Range of investments
Curated investment range: Offers a fixed menu of investment funds (typically 10 to 50) curated by the PRSA provider.
Brokerage-style: Offers a vast array of investment options, analogous to a traditional stockbroking account. Additional stockbroking fees apply. Learn more about brokerage-style PRSAs in Ireland.
Dimension 2: Who makes the decisions
Self-directed: You choose the investments independently without assistance from the PRSA provider or broker.
Advisory: Your advisor recommends a portfolio and you approve it, or you choose with assistance from the advisor.
Discretionary: A professional manages the investments for you.
Don't get these dimensions confused, they are separate and independent, and all six combinations exist in the Irish market, as shown in the table below:
| Self-directed | Advisory | Discretionary | |
|---|---|---|---|
| Curated | You pick from a small menu of funds | Your advisor recommends a mix from the menu; you approve | A fund manager picks within the menu for you |
| Brokerage | You pick from thousands of options | Your advisor recommends from thousands; you approve | A fund manager picks from thousands for you |
Tax Benefits of PRSAs
PRSAs offer several tax advantages:
- Tax relief on contributions at your combined marginal rate of income tax
- Tax-free growth on investments within the PRSA
- 25% tax-free lump sum at retirement (within limits)
Accessing Your PRSA
You can access your PRSA from age 60 (age 50 if retired) and:
- Take a tax-free lump sum (within limits)
- Purchase an annuity (a guaranteed income for life)
- Invest in an Approved Retirement Fund (ARF)
- Take a taxable lump sum
Read the Pensions Authority guide for more details.