PRSA’S Retirement & Pension Provision
What is a PRSA?
A MEMBERS™ Financial Services PRSA is a flexible, portable, low-cost, transparent pension that anyone can take out, regardless of employment status, subject to Revenue limits. You and/or your employer, if any, can make tax-free contributions to it, you can take it with you if you change your job or employment status and you can stop and start making contributions at any time.
With the proceeds of your PRSA, you can invest your fund to provide you with a pension for life, or, subject to Revenue requirements, an Approved Retirement Fund (ARF), which will give you even more freedom in how you use your retirement savings.
What is a PRSA AVC?
Additional Voluntary Contributions are more commonly known as AVCs. They are voluntary contributions made by employees who are already members of a company-sponsored pension scheme. AVCs are in addition to any normal member contributions that are required under the scheme. AVCs enable you to top up the benefits of your employer’s scheme from your own resources, subject to the Revenue maximum allowable benefits for your service and final salary.
Tax Advantages
There can be substantial tax savings associated with PRSA contributions, making your funding for retirement very affordable. For example, if you were to put €200 a month into a PRSA, it might cost you only €112 per month due to tax relief and PRSI relief.
This example assumes that you are in employment and paying tax on your marginal income at a rate of 42% and PRSI at 2%. If you are paying tax at 20%, it will still only cost you €156. Please note that tax relief is not automatically guaranteed, and that relief against PRSI is not available to the self-employed. If you are in employment and a member of your employer’s pension scheme, you can claim tax relief, against tax paid on earnings, in respect of AVCs.
How is a PRSA Invested?
Many people are not comfortable making investment decisions, particularly when it comes to investing for their retirement. Standard PRSAs and PRSA AVCs simplify this decision for you. Through Eagle Star’s Default Investment Strategy your pension fund is gradually transferred from a higher-risk portfolio to a lower-risk portfolio as you approach retirement. This protects you from the impact of a stock market crash prior to retirement.
What’s the Next Step?
If you want to find out more about MEMBERS Financial Services PRSAs, just make an appointment to see the MEMBERS Financial Services Representative at your local credit union.
