Wednesday, April 20, 2011

PRSA (Personal Retirement Savings Account) Anomaly

Seriously, does anyone know of any other Country in the World where a employee would be put at a financial disadvantage (via legislation) in choosing one pension product over another?

There is currently an anomaly for PRSA (Personal Retirement Savings Account) policy holders where the employer is contributing to the employee’s PRSA.

If an employer is contributing €100 to an employee’s PRSA, the employee is €11 worse off than an employee whose employer in contributing the same amount to an OPS (Occupational Pension Scheme).

Although Fine Gael have committed to putting the PRSA & OPS on an equal footing in respect of this anomaly, it probably will not happen before the next budget.

So, what’s happening in the meantime? Well, PRSA policy holders (where employer is contributing) are being advised to switch to OPS’s and I am aware of one PRSA Provider that has written to the employers suggesting that they change their PRSA Schemes to OP Schemes.

To me, this seems a tad extreme. i) There is no cap on charges on an OPS - Initial commission is way more generous and providers can increase the annual management charge if they see fit and ii) The OPS route will involve some form of Trustee Training for the employer or failing this, they will be charged for complying with the legislation.

If I may make a suggestion, while this anomaly is ‘put on an equal footing’. It would make a hell of a lot of sense for Revenue/Department of Finance to allow those that are disadvantaged to claim back the 11% via the PRSI Refund Section of Revenue in Limerick.

This might stop a mass exodus from PRSAs before the legislative changes can be made.

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