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Personal Retirement SavingsAccounts (PRSAs)Employers’ Obligations
Foreword by
Mary Coughlan TD
Minister for Social and Family Affairs
A Chara,
I welcome the publication of this booklet as a useful and timely guide
for employers which sets out the legal obligations with regard to Personal
Retirement Savings Accounts (PRSAs).
This booklet will be a valuable tool for employers to help bring pension
awareness into the workplace. The information provided in this booklet
will also help employers to meet their obligations before the 15th September
deadline to provide access for their employees to a Standard PRSA, on and
from that date.
I believe that PRSAs as a portable new pensions product are a key
development in encouraging flexible retirement savings.
This booklet is the first of three that form part of the National Pensions
Awareness Campaign. Take up of the new products has been slow to date,
and these publications allied to the general awareness campaign by the
Pensions Board is aimed at increasing coverage amongst the workforce
from its current level of 50 to 70 per cent.
Pension awareness is extremely important, and will become more so, as
our older population continues to grow in numbers and life expectancy
extends, and this booklet and campaign will help address that need.
Is mise le meas,
Mary Coughlan TD
Minister for Social and Family Affairs
1. Introduction
The purpose of this booklet is to describe employers’ legal obligations
with regard to Personal Retirement Savings Accounts (PRSAs).
The Pensions (Amendment) Act, 2002 (“the Act”) which was passed into
law on 13 April 2002 introduced the framework for PRSAs and their
associated tax reliefs and arrangements.
The Act arose out of decisions by Government in relation to
� the Pensions Board’s Report to the Minister for Social and
Family Affairs “Securing Retirement Income” and,
� other reports by the Board to the Minister, in which
recommendations were made with the objective of improving
the quality and extent of pensions coverage.
In its report to the Minister “Securing Retirement Income”, the Board
recommended the introduction of a new style of private pension savings
account – the PRSA. This low-cost, easy access, investment account is
designed to allow people to save for retirement in a flexible manner.
The PRSA is also designed to be owned by an individual, regardless of
their employment status, to be transferable from job to job, and to be
available from a variety of providers.
Since February 2003 the Board, which has responsibility for approving
PRSA products and monitoring the activities of PRSA providers in respect
of their approved products, has approved a total of 52 products; 19 of
which are Standard PRSAs and 33 are non-Standard PRSAs. A list of PRSA
providers and their products is available on the Board’s website on
www.pensionsboard.ie
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PRSAs Employers’ Obligations
Where employers do not operate an occupational pension scheme, or,
where there are certain restrictions applying to the occupational pension
scheme then they are required under the legislation to ensure that their
employees have access to at least one Standard PRSA. This provision
comes into mandatory effect on 15 September 2003. There follows in
a Frequently Asked Questions (FAQ) format a guide to PRSAs from the
employer’s perspective. Throughout the FAQs you will find terms printed
in italics. These are explained in the Glossary at the end of the booklet.
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2. PRSAs Explained
� What is a PRSA?
A PRSA is a contract between an individual and an authorised PRSA
provider in the form of an investment account that can be used to
save for retirement. It is a type of defined contribution arrangement
where the investment return is tax exempted. There are two types
of PRSA – a Standard PRSA and a non-Standard PRSA.
� What are the key features of all PRSAs?
All PRSA products must be jointly approved by the Pensions Board
and the Revenue Commissioners. In addition all PRSAs are obliged
to offer a Default Investment Strategy (DIS). The DIS adopts an
investment profile that is expected to meet the reasonable
expectations of a typical contributor for the purpose of making
savings for retirement. The DIS is applied unless the contributor
indicates otherwise in writing.
� What is a Standard PRSA?
A Standard PRSA is a contract that has maximum charges of 5%
on the contributions paid and 1% per annum on the assets under
management. Charges may be discretionary up to these maximum
levels. Apart from temporary cash holdings, investments are only
permitted in pooled funds. A Standard PRSA may not be marketed
or sold if the purchase of the product is conditional on some other
product e.g. life assurance being bought at the same time.
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PRSAs Employers’ Obligations
� What is a non-Standard PRSA?
A non-Standard PRSA is a contract that does not have maximum
limits on charges and/or allows investments in funds other than
in pooled funds.
� How do PRSAs impact on employers?
All employers will be required by 15 September 2003 to have entered
a contract with a PRSA provider so that access to at least one Standard
PRSA will be available for all “excluded employees” on and from that
date. In summary excluded employees are:
� employees of an employer who do not offer an occupational
pension scheme, or
� employees who are included in an occupational pension scheme
for death in service benefits only, or
� employees who are ineligible to join the scheme and who will not,
under the rules, become eligible to join the scheme for pension
benefits within six months from the date they commenced
employment, or
� employees who do not have access to AVCs through their
occupational pension scheme.
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3. Employers’ Obligations To Provide Access to PRSAs
� When will I be required to provide access to a Standard PRSA?
The mandatory access requirement becomes law on 15 September
2003.
� What must I do to provide access to a Standard PRSA?
You must:
� enter into a contract with a PRSA provider,
� notify ‘excluded employees’ that they have a right to contribute
to a Standard PRSA,
� allow the PRSA provider or intermediary reasonable access to your
‘excluded employees’ at their work place,
� allow reasonable paid leave of absence to enable such ‘excluded
employees’ to set up a Standard PRSA, subject to work
requirements,
� make deductions from payroll at your employees request
(see PRSA Contributions).
� Do I have to give any advice to my employees in relation to PRSAs?
No, but you must allow your PRSA provider or intermediary
reasonable access to your employees in order to brief them on PRSAs.
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PRSAs Employers’ Obligations
� I have a small workforce, less than five employees – do I still have to provide access to a Standard PRSA?
Yes – all employers regardless of the size of their workforce are
obliged to provide access to a Standard PRSA if those employees
fall into the category of “excluded employees”.
� I have a number of part-time, fixed term contract andseasonal employees – do I have to provide access to aStandard PRSA for these employees?
Yes, all employees, whatever their status, must be given access to a
Standard PRSA if they fall into the category of “excluded employees”.
� Do I have to provide access to a PRSA even though I operatean occupational pension scheme?
No, provided all employees, including seasonal, part-time workers etc
are eligible to join the scheme for pension benefits within six months
of joining service.
However, if you have only one “excluded employee”, you would still
have to provide access to a Standard PRSA for that employee.
� What is the position in relation to Additional VoluntaryContributions?
If you have an occupational pension scheme that does not currently
offer a facility for Additional Voluntary Contributions (AVCs) you are
also obliged to make available a Standard PRSA. This will require an
amendment to the scheme rules. You should also note that PRSAs will
replace one member AVC Schemes. Group AVC Schemes can convert to
PRSAs at any time.
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� What obligation do I have in respect of employeecontributions to PRSAs?
Employers must pass over to the relevant account of the PRSA
provider employee contributions within 21 days of the end of the
month in which the contributions were deducted. You cannot make
any deduction from this payment.
� Do I as an employer have to contribute to PRSAs on myemployees behalf?
Employers may contribute but are not obliged to do so. However, if
you decide to contribute to your employees’ PRSA, a similar timescale
to that for employee payroll deductions will apply. You cannot make
any deduction from this payment.
� Do I have any responsibility in relation to the investmentperformance of PRSAs?
No, the Act is very clear that an employer which enables its
employees to participate in a Standard PRSA will have no duty to
those employees regarding the investment performance of that
Standard PRSA.
� What happens if I do not comply with the statutoryrequirements to provide access to a Standard PRSA?
You may be found guilty of a criminal offence in accordance with the
Act, for which fines and penalties ranging from €1,500 to €12,700
and/or imprisonment for terms of one or two years may be imposed.
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PRSAs Employers’ Obligations
4. PRSA Providers
� What is a PRSA provider?
Investment business firms, insurance companies and credit
institutions may be authorised PRSA providers. The actual products
to be sold are approved jointly by the Revenue Commissioners and
the Pensions Board.
� Where can I find a list of approved PRSA products?
A list of approved PRSA products and the respective providers are
available on the Pensions Board website on www.pensionsboard.ie
� If I enter into a contract with a PRSA provider, must myemployees who want to take out a PRSA have to take outthis Standard PRSA with that provider?
No, an employee can go to any authorised PRSA provider but you
are not obliged to make deductions from payroll for that employee.
In such a case they would make PRSA contributions directly to the
provider, by, for example, direct debit or cheque.
� Are PRSA providers obliged to disclose information inrelation to PRSAs?
Yes, the Act prescribes a range of information to be disclosed by PRSA
providers to contributors. Full details in relation to content, manner,
frequency etc of disclosure are set out in Regulations.
� Can transfers be effected between PRSA providers?
Yes, a PRSA contract must permit the transfer of PRSA assets from
one provider to another without imposing a transfer charge. A
provider to an employer nominated Standard PRSA that facilitates
employee payroll deductions of contributions must accept transfers
of any PRSA assets held elsewhere by such employees.
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5. PRSA Contributions
� What must I do in relation to payment of my employees’contributions to a PRSA?
You must, if requested, deduct employees contributions from payroll
and remit all contributions, employee and employer (if any), to the
relevant account of the PRSA provider within 21 days of the end of
each month. You cannot make any deduction from this payment.
� Is there a minimum level of contribution?
Yes, there are upper limits placed on the minimum contribution
levels that a PRSA provider may require. These are €300 per annum,
€10 per electronic funds transfer, or €50 per transaction using
other methods.
� What information will I have to give in relation to PRSAcontributions?
You will have to advise both your employees and the PRSA provider
in writing at least once a month of:
a) the total amount deducted from the employee’s salary, and
b) if appropriate, the total amount paid by you on behalf of
the employee
in the preceding month or if the previous statement was given less
than a month before, in the period since the previous statement was
given. You may satisfy this requirement by notification on whatever
documentation is normally provided to your employees in relation
to salary details, e.g. payroll slip.
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6. Benefits
� How will my employees’ PRSA benefits be determined?
Your employees’ PRSA benefits will be determined by the contributions
paid by and on behalf of them and the investment return on those
contributions. Your employees as the PRSA contributors are the
beneficial owners of the underlying assets of the PRSA contract.
The assets may not be used as a form of collateral.
� When can my employees draw on their PRSA benefits?
Benefits can normally be taken between ages 60 and 75. In certain
circumstances benefits can be taken earlier e.g. retirement from
employment at age 50 or over or, if at any time, an employee
becomes permanently incapacitated.
� What options will be available to my employees at retirement?
PRSA proceeds in relation to periods when the employee was not
a member of an occupational pension scheme may be taken 25% in
cash, tax-free and the balance can be used to buy an annuity for life
or transferred to an Approved Retirement Fund (ARF), subject to the
usual conditions including AMRF requirements or withdrawn in cash
subject to PAYE and the AMRF conditions. PRSAs accumulated while
the employee was a member of an occupational pension scheme will
be subject to the existing treatment of occupational benefits.
Full details of benefit options are set out in A Guide to Personal
Retirement Savings Accounts (PRSAs) which has been prepared by the
Office of the Revenue Commissioners. This document can be viewed
on the Revenue’s website on www.revenue.ie
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� Do my employees have to take all of their PRSA benefits at retirement?
No, they can choose to take gradual benefits from their PRSA and
continue to make PRSA contributions subject to benefits commencing
and contributions ceasing at age 75 at the latest.
� What happens if an employee dies before taking his/herPRSA benefits?
Where death occurs before benefits are taken from a PRSA, the PRSA
fund will pass in its entirety to the employee’s estate, free of income
tax. Inheritance tax will apply in the normal way.
� What happens when death occurs after the PRSA benefits commence?
The position depends on the type of pensions option the employee
chooses at retirement some of which will have certain guarantees.
More information on this can be obtained in the Revenue guide
referred to above.
� What happens if any of my employees become seriously ill?
If any of your employees become seriously ill, they can draw on their
PRSA benefits immediately, regardless of their age. This is subject to
Revenue requirements.
� What if any of my employees move on to new employment?
As a PRSA is their personal pension plan they can bring it with them
from job to job, and from employment to self-employment or vice
versa. PRSA benefits can be transferred to an occupational pension
scheme or to another PRSA.
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PRSAs Employers’ Obligations
� Can occupational pension scheme benefits be transferred to PRSAs?
Transfers from an occupational pension scheme to a PRSA will only be
allowed where a member has been in the scheme for 15 years or less
and either:
� the scheme is being wound up, or
� the member is changing employment.
The value of AVC contributions to an occupational pension scheme may
be transferred to a PRSA without regard to the foregoing restrictions.
� Are there disclosure requirements concerning transfers fromoccupational pension schemes to PRSAs?
Yes, a transfer value cannot be accepted by a PRSA provider unless the
member has first been provided with a certificate comparing potential
benefits from the occupational pension scheme and the PRSA and a
written statement as to why a transfer to a PRSA would or would not
be in his/her interests. These disclosure provisions do not apply in
certain circumstances.
� What about refunds of ordinary contributions fromoccupational pensions schemes?
Employees who are entitled to refunds of contributions on leaving
service can opt to transfer the refund to a PRSA, instead of taking it
subject to standard rate tax deduction. The scheme rules may need
to be amended to allow for such a transfer.
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� Do occupational pension schemes have to accept transfersfrom PRSAs?
It is intended to introduce Regulations to provide for the transfer
of PRSA assets to:
a) a defined benefit or defined contribution scheme, and
b) to arrangements for the provisions of retirement benefits
established outside the State to the same extent that transfers
are permitted from a scheme.
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PRSAs Employers’ Obligations
7. PRSA Tax Reliefs
� Will my employees benefit from tax relief in respect of theirPRSA contributions?
Yes, contributions paid to a PRSA will benefit from tax relief at an
individual’s marginal rate. The maximum relief in any one year is
expressed as a percentage of Net Relevant Earnings (broadly earnings
from a trade, professional employment less certain allowable
expenses) subject to an earnings cap of €254,000 per annum.
The maximum allowable contributions for tax purposes in any year
are as follows:
Age % of Net Relevant Earnings
Under 30 years of age 15%
30-39 years of age 20%
40-49 years of age 25%
50 years and over 30%
Relief will also be given from PRSI and the Health Levy.
� How does this work?
When you deduct qualifying PRSA contributions from your employees,
the net pay arrangement will apply. This means that PAYE, PRSI and
Health Levy deductions will be calculated on your employees’ wages
or salaries net of PRSA contributions. You will be able to operate the
“net pay” basis once you hold a PRSA net pay certificate.
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� What about contributions to an AVC-PRSA?
Employees in occupational pension schemes may pay AVCs into a PRSA.
In these circumstances the normal limits for tax relief purposes,
described above, apply to the total employee contributions.
� Do I, as an employer, get tax relief on any contributions I make to an employee’s PRSAs?
Yes, contributions paid by employers are fully deductible for
Corporation Tax purposes. Contributions paid by you are treated as a
benefit-in-kind. Your employees are then entitled to tax relief on these
contributions subject to the limits on the relief. In practice, it’s likely
that a benefit-in-kind charge will only arise where the total
contributions in any one year exceed the annual limit.
� Are the PRSA investments taxed?
No tax is charged on the investment income earned by PRSAs.
� Where can I get more information on the tax rules relatingto PRSAs?
Full details are available in the Revenue guide
referred to in Section 6 (PRSA Benefits).
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PRSAs Employers’ Obligations
8. Glossary of Terms
Additional Voluntary Contributions (AVCs): means voluntary pension
contributions made by a member of a pension scheme over and above
the amount of contributions (if any) that are required under the rules
of the scheme.
Defined Benefit: means where the amount of a pension benefit is
specified by formulae in the rules of the pension scheme.
Defined Contribution: means where the amount of a pension benefit
depends on the accumulated value of contributions paid to a pension
scheme and the investment returns earned on those contributions.
Default Investment Strategy: means an automatic investment strategy
that is linked to general good practice for investment for retirement
and is certified by a PRSA actuary. The DIS provides for investment in,
pooled funds.
Occupational Pension Scheme: means a pension scheme set up by an
employer to provide retirement benefits for employees. This term is used
interchangeably with “company pension scheme”.
Pooled Funds: means a collective investment scheme or an internal
linked fund the benefit of which is made available by means of a
contract of insurance.
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9. The Pensions Board
The Pensions Board was established by the Minister for Social Welfare
under the terms of the Pensions Act, 1990. Its main functions as set
out in that Act and amending legislation, most recently the Pensions
(Amendment) Act, 2002, are:
� to monitor and supervise the operation of the Pensions Act and
pension developments generally, including the activities of PRSA
(Personal Retirement Savings Account) providers, the provision
of PRSA products and the operation of PRSAs;
� to issue guidelines or Guidance Notes on the duties and
responsibilities of trustees of schemes and Codes of Practice
on specific aspects of their responsibilities;
� to issue guidelines or Guidance Notes on the duties and
responsibilities of PRSA providers in relation to PRSA products;
� to encourage the provision of appropriate training for trustees of
schemes, and to advise the Minister on standards for trustees;
� to advise the Minister on all matters in relation to the Pensions Act
and on pension matters generally.
Occupational pension schemes must register with the Board, and most
schemes must pay an annual fee to meet the Board’s administrative costs.
The Board can act on behalf of pension scheme members who are
concerned about their scheme; it can investigate the operation of pension
schemes; it has the power to prosecute for breaches of the Pensions Act
and to take court action against trustees for the protection of members
and their rights.
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PRSAs Employers’ Obligations
In relation to PRSAs, the Board and the Revenue Commissioners are
jointly responsible for the approval of PRSA products in order to provide
for the protection of PRSA contributors and the need for effective
supervision of the production, marketing and sale of such products. The
Board can collect fees on an annual basis from PRSA providers to defray
the costs of the supervision of this function; it can act on behalf of PRSA
contributors who have concerns about their PRSAs; it can investigate the
state of a PRSA product, the PRSA provider in respect of its PRSA activities
and employers in relation to statutory requirements of the Pensions Act;
it has the power to initiate prosecutions for breaches of the Pensions Act.
The Pensions Board includes representatives of trade unions, employers,
Government, pension scheme trustees, the pensions industry, consumer
interests, pensioner interests and various professional groups involved
with occupational pension schemes and PRSAs.
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10. Further Information
The following booklets are also available free of charge from the
Pensions Board:
� So You’re a Pension Scheme Trustee?
A brief guide to the duties and responsibilities of trustees
of occupational pension schemes.
� Is My Pension Secure? *
A guide to the protections provided by the Pensions Act.
� Selecting Member Trustees
A guide to the participation by members in the selection
of occupational pension scheme trustees.
� What Do You Know About Your Pension Scheme?
An overview of the information which trustees of occupational
pension schemes must give.
� The Pensions Board *
An introduction to the Board, its functions and its membership.
� What Happens to My Pension if I Leave?
A guide to the preservation and transfer of benefits for early leavers
under the Pensions Act.
� A Brief Guide to Pensions
A guide to help you understand your pension scheme and its benefits.
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PRSAs Employers’ Obligations
� What Happens When Your Pension Scheme is Wound Up or Merger/Acquisition Takes Place?
A guide to trustees and pension scheme members on the winding
up of a pension scheme and on the effects of mergers/acquisitions
on pension schemes.
� A Guide to Your Scheme’s Annual Report
A guide to pension scheme members to assist them in reading
and understanding their scheme’s Annual Report.
� A Brief Guide to the Pension Provisions of the Family Law Acts
Guidance on the pension provisions of the Family Law Act, 1995
and the Family Law (Divorce) Act, 1996.
� Securing Retirement Income
National Pensions Policy Initiative. A brief guide to Report of the
Pensions Board.
� A Brief Guide to Annuities
A guide to annuities and how they work.
� A Brief Guide to Integration
Guidance on the integration of occupational pension scheme benefits
with the benefits payable under the Social Welfare system.
� Women and Pensions
A guide on pension provisions for women.
� Pensions (Amendment) Act, 2002
Frequently Asked Questions (FAQs)
*Also available in Irish
PRSAs Employers’ Obligations
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PRSAs Employers’ Obligations
Verschoyle House
28/30 Lr Mount St
Dublin 2
Tel 01 613 1900
Fax 01 631 8602
Email [email protected]
www.pensionsboard.ie
No liability whatsoever is accepted by the Pensions Board, its servants or agents
for any errors or omissions in the information contained in this booklet or for
any loss occasioned to any person acting or refraining from acting as a result of
any statement in this booklet.
August 2003