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The Pensions Board

February 2003

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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.

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Personal Retirement Savings Accounts (PRSAs) • What are Personal Retirement Savings Accounts (PRSAs)?

A PRSA is

- an investment vehicle used for long term retirement provision by employees, self employed, homemakers, carers, unemployed, or any other category of person.

- a contract between an individual and an authorised PRSA provider

in the form of an investment account.

There are two types of PRSA - namely a Standard PRSA and a non-Standard PRSA.

• How will the PRSA benefits be determined?

The PRSA benefits will be determined by the contributions paid by and on behalf of the contributor and the investment return on those contributions. The PRSA contributor is the beneficial owner of the underlying assets, which may not be used as a form of collateral.

• What are the key features of all PRSAs?

The features include:

Approval: The Pensions Board and the Revenue Commissioners jointly approve PRSA products.

Investment: Each PRSA provider is obliged to prepare a Default Investment Strategy (DIS) for each product which complies with specified requirements. The DIS is an automatic investment strategy to be applied unless the contributor indicates otherwise (in writing) - the strategy is linked to general good practice for investment for retirement and be certified by the PRSA actuary.

The DIS provides for investment in, apart from temporary cash holdings, pooled funds. Standard PRSAs are only permitted to invest, apart from temporary cash holdings, in pooled funds, i.e. a collective investment scheme or an internal linked fund the benefit of which is made available by means of a contract of insurance.

While no restrictions are laid down for investments held outside the DIS, Regulations may be introduced in this regard at a future date.

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• What charges apply?

A list of what is and what is not included by way of a charge is set out in the Interpretation in Section 91 of the Principal Act¹.

• How are charges to be expressed?

Charges may be expressed as a percentage of contributions and/or PRSA assets, and may vary by product, method of distribution/payment, type of investment held, duration, size of contributions/assets.

Charges may not be expressed in cash terms. • What charges cannot be applied? Charges cannot be applied arising from

- transfers received by the PRSA provider from another PRSA provider or from other pension arrangements,

- termination of contributions or transfer of funds, - the suspension of or recommencement of contributions.

• Is there a maximum level of charges? Yes, in relation to Standard PRSAs (see below).

Charges for a Standard PRSA may be discretionary up to the maximum level of charges permitted for such a PRSA. Charges for non-Standard PRSAs may be discretionary and do not have a stated maximum level. The PRSA provider is obliged to give prior notification of at least 2 months to the contributor in advance of any changes to the PRSA charging structure.

• Who may contribute to a PRSA?

Contributions may be made by individuals regardless of their employment status. Employers may contribute but are not obliged to do so.

¹In this document references to “the Principal Act” mean the Pensions Act, 1990 and references to “the Act” mean the Pensions (Amendment) Act, 2002.

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• Is there a minimum level of contributions?

Yes, PRSA providers cannot impose a minimum contribution greater than (a) €300 per annum, (b) €10 per electronic transaction, or (c) €50 per transaction for other methods of payment. Contributions received by PRSA providers must be held in a custodian account.

• What are the characteristics of a Standard PRSA? A Standard PRSA is a PRSA whose characteristics include:

Maximum charges – PRSA providers are prohibited from imposing charges in excess of 5% of contributions paid and 1% per annum of the PRSA assets. Investment – In terms of investment a Standard PRSA is only permitted to invest, apart from temporary cash holdings, in pooled funds. Mandatory Employer Access – An employer who is not operating an occupational pension scheme or whose scheme limits membership eligibility or imposes a waiting period will be obliged to provide access to at least one Standard PRSA for his employees. Marketing – A Standard PRSA may not be marketed or sold if the purchase of this product is dependent on the purchase of any other product (e.g. life assurance). Disclosure – Restricted disclosure requirements apply to a Standard PRSA.

• What is a PRSA provider? The Act defines a PRSA provider as

- an investment firm authorised in accordance with Council Directive 93/22/EEC of 10th May 1993 by a competent authority where the firm’s authorisation permits it to engage in PRSA activities,

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- a life office authorised in accordance with Council Directive 79/267/EEC of 5th March 1979 by the Department of Enterprise, Trade and Employment to transact specified classes of insurance,

- a credit institution

which produces, markets or sells PRSA products.

This means, for example, that existing investment business firms and financial entities who are appropriately authorised/licensed by the Central Bank of Ireland or the Department of Enterprise, Trade and Employment may be PRSA providers. Other entities who wish to be a PRSA provider should apply for the requisite authorisation to undertake this type of business activity.

• How must an application for approval of a PRSA product be made?

An application for approval of a PRSA product must be made in writing and signed by two directors of the applicant (PRSA provider) and be accompanied by a certificate provided by a PRSA actuary and the two directors referred to above stating that in their opinion the product complies with the statutory requirements and the relevant regulations.

• What are the Board’s requirements in order to approve a PRSA product?

The applicant must satisfy the Board:

- that the product complies with statutory requirements, - that in relation to the producing, marketing or selling of the

product the applicant - has adequate levels of expertise to carry on those activities, - has organised the structure of its business related to its PRSA

activities in a manner which will facilitate the Board in performing its supervisory functions in relation to those activities, and

- has met the statutory contractual application requirements.

• What are the Revenue Commissioner’s requirements in order to approve a PRSA product?

The Revenue Commissioners must be

- notified of approval of the product by the Board, and

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- satisfied that the provisions of Chapter 2A (inserted by section 4 of the Act) of Part 30 of the Taxes Consolidation Act, 1997, are met

before they approve a PRSA product. • Are there any other requirements to be met as part of the

application for approval of a PRSA product?

Yes, in applying for approval of a PRSA product a provider must have contractual arrangements in place with the following parties:

- an investment manager/s - an auditor - an administrator/s - a PRSA actuary - a custodian. Apart from the contractual arrangement with the auditor, in each case unless it has satisfied the Board that it intends to provide and is capable of providing such a service itself, the provider must enter into the contractual arrangement prior to the granting of approval of its PRSA product.

• Are there fees payable as part of the application process?

Yes. The application must be accompanied by a fee payable to the Board, details are set out in Regulations.

• How long will it take to approve a PRSA product?

An applicant will be informed by the Board as to whether or not a product has been approved within 3 months of the date of receipt of all information in respect of the application.

• Is there any right of appeal in the event of an applicant being refused?

Yes. In the event of an application being refused the applicant may appeal to the Court in a summary manner.

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• Is there be a code of conduct in relation to producing, marketing and selling PRSA products?

Yes. The Board can prepare and amend as appropriate a Code of Conduct for producing, marketing and selling PRSA products by PRSA providers. The Code is cognisant of the need for (a) protection of PRSA contributors, and (b) the effective supervision of PRSA activities of the provider.

• Can PRSA products be suspended or withdrawn?

Yes. In certain circumstances, the Board, in consultation with the Revenue Commissioners, may suspend or withdraw product approval. These include: (a) on request by the provider,

(b) the provider having ceased to trade for more than 6 months, (c) the provider having failed to a serious extent to comply with its

statutory obligations. If invoking the suspension or withdrawal of approval of a PRSA product the Board must notify the relevant PRSA provider.

• What happens if the PRSA product is suspended or withdrawn?

Where the approval of a PRSA product is suspended or withdrawn the PRSA provider must inform the contributors in writing of this fact. Where the approval of a PRSA product is withdrawn the PRSA provider must make immediate arrangements to transfer the PRSA assets to another provider. The Board is obliged to publish a notice of withdrawal of approval of a product in Iris Oifigiúil and in one or more newspapers within 28 days of withdrawal.

• Is there a right of appeal against the withdrawal or suspension of approval of a PRSA product?

Yes. Where the Board suspends or withdraws approval of a product the PRSA provider may appeal to the Court in a summary manner.

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• How do PRSAs interface with Retirement Annuity Contracts (RACs)?

RACs will continue to be available for pension provision. Existing RAC policy holders will be permitted, by mutual agreement and subject to specified requirements (to be set out in Regulations), to transfer assets from a retirement annuity contract to a PRSA.

• How do PRSAs interface with Buy-Out Bonds (BOBs)?

Buy-out bonds will continue to be available for pension provision until such time as Section 122 of the Principal Act, which deals with the replacement of buy-out bonds, is commenced.

• How do PRSAs interface with Additional Voluntary Contributions (AVCs)?

New single member AVC arrangements must, from the commencement of Section 123 of the Principal Act, be channelled through PRSAs. If a scheme does not currently offer an AVC option, the employer will, unless he operates another scheme permitting payment of AVCs, be required to permit access to at least one Standard PRSA - the details to be set out in Regulations.

• How can transfers be effected between PRSA providers?

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.

• How can transfers be effected from PRSAs to occupational pension schemes/overseas schemes?

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 provision of retirement benefits

established outside the State to the same extent that transfers are permitted from a scheme.

• How can transfers be effected from occupational pension

schemes to PRSAs?

The circumstances permitting transfers from occupational pension schemes to PRSAs are included in the tax provisions contained in the Appendix.

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• How are PRSA benefits paid?

(i) The circumstances for payment of PRSA assets are set out in the Appendix which deals with the tax provisions for PRSAs.

(ii) Apart from the circumstances at (i) above, a PRSA provider may

not pay out PRSA assets except where:

- the value of the PRSA assets does not exceed €650 at the time of request by the contributor or 3 months or more has expired since the provider has served a written statement advising the contributor to transfer his PRSA assets to another PRSA or pension arrangement or to make further contributions, and

- no contributions have been made for at least 2 years in which case the PRSA provider may refund the contributor’s PRSA assets without the contributor’s consent.

• Does an employer have to provide access to a PRSA?

An employer will be obliged to provide mandatory access to at least one Standard PRSA where (a) he does not operate an occupational pension scheme; or (b) he operates an occupational pension scheme for his employees, BUT

- the eligibility for membership of the scheme for retirement

benefits does not cover all employees, - employees have to wait more than six months from joining the

company to be included in the scheme for retirement benefits, - scheme members are provided with death in service benefits

only.

It is expected that section 121, dealing with employer access and remittance of contributions, will come into effect in Summer 2003.

• What must an employer do to provide access to a Standard

PRSA? To provide access to a Standard PRSA, an employer must:

- enter into a contract with at least one PRSA provider to enable employees to participate in a Standard PRSA,

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- notify employees of their right to contribute to a Standard PRSA, - allow PRSA providers or intermediaries reasonable access to

employees (who would be entitled to reasonable paid leave) to discuss Standard PRSA contracts,

- make deductions from payroll at the employees’ request.

• What will be the position in relation to payment of employee contributions to a PRSA?

The Act provides that an employer who, at the request of the employee, makes deductions from payroll in relation to PRSA contributions must remit these contributions to the custodian account of a PRSA provider within 21 days following the end of the month in which the deduction was made. An employer cannot make any deduction from this payment.

• What will be the position in relation to employers’ contributions to a PRSA?

In the event of an employer making contributions on behalf of a member (he is not obliged to do so) a similar timescale to that for employee payroll deductions will apply. An employer cannot make any deduction from this payment.

• What information will the employer have to give in relation to PRSA contributions?

The employer must advise both the employee and the 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 the employer 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.

The employer may satisfy this requirement by notification on whatever documentation is normally provided to the employee in relation to salary details e.g. payroll slip.

• Will the employer have any responsibility in relation to the investment performance of a Standard PRSA?

No. An employer who enables his employees to participate in a Standard PRSA will have no responsibility in relation to the investment performance of the Standard PRSA chosen by an employee.

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• What is the role of the Pensions Board concerning the regulation of PRSAs?

In general, the Pensions Board is responsible for the regulation, supervision of and compliance with the PRSA provisions of the Act. The Board and the Revenue Commissioners are jointly responsible for the approval of PRSA products. Prudential supervision of PRSA providers remains within the jurisdiction of existing regulators. The Board is responsible for the monitoring and supervision of a provider’s activities in respect of its PRSA products which, inter alia, involves examining various reports submitted to the Board by providers in accordance with statutory requirements. Other features of the regulatory role of the Board regarding PRSAs are set out in the Act.

• What is the role of the PRSA actuary? The obligations placed on the PRSA actuary include the following:

- To determine the extent to which the provider has complied with statutory requirements.

- To certify that

(a) charging practice reflects illustration details and complies with the statutory requirements, and

(b) the product complies with the statutory requirements.

Regulations have been issued in relation to the matters above.

• What is the role of the PRSA auditor?

The role of the auditor is to prepare and issue to the Board a report in relation to the custodian account of the PRSA provider and its operation. Details will be covered by way of Regulations.

• What is the role of the PRSA administrator?

The administrator is required to make provision for such matters as may be set out in Regulations.

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• Will PRSAs be affected by the Pension Provisions of the Family Law Acts?

Yes. The scope of the provisions relating to Pension Adjustment Orders in the Family Law Act, 1995 and the Family Law (Divorce) Act, 1996 have been extended to include PRSAs.

• Will PRSAs be subject to the “whistleblowing” provisions of the Principal Act?

Yes, the compulsory and voluntary requirements (“whistleblowing”) which currently apply to occupational pension schemes as set out in Part VIII of the Principal Act will also apply to Part X of the Principal Act in respect of PRSAs.

• Are PRSA providers obliged to disclose information in relation to

PRSAs?

Yes. The Act prescribes a range of information to be disclosed by PRSA providers. Further details in relation to content, manner, frequency etc. of disclosure are set out in Regulations.

• Are persons entitled to information before entering into a PRSA contract?

Yes. A PRSA provider must give a person a Preliminary Disclosure Certificate before they enter into a PRSA contract. This Certificate shows the reasonable expectation of the ultimate benefits based on certain assumptions on a generic basis.

• Does information on commission and charges have to be disclosed by PRSA providers?

Yes. Full disclosure of all potential and actual commission and other charges payable by contributors is required. This information must be provided: - to a person entering into a PRSA contract, and - to a PRSA contributor other than a Standard PRSA contributor. Also, any proposed changes to be made under a PRSA contract must be notified to contributors at least 2 months prior to the proposed change.

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• Do PRSA providers have to disclose any statement of projections concerning PRSAs?

Yes. Providers must disclose a Statement of Reasonable Projection (SRP) to persons on entering a PRSA contract and to PRSA contributors. The SRP must contain information as follows: - The reasonable expectation of the ultimate benefit based on

assumptions, related to future contributions and investment returns on an individualised basis.

- Advice as to the importance of

- making adequate provisions for retirement, and

- obtaining appropriate financial advice. - Warnings for the benefit of a potential or actual contributor to a

PRSA – details are specified in Regulations. - A statement relating to the value of the State Old Age

Contributory Pension. Details are set out in Regulations.

• When does the Statement of Reasonable Projection (SRP) have to be disclosed to persons?

The provider must issue the SRP within 7 days on entering into a PRSA contract. It should be noted that the PRSA contract is not enforceable against the person until 15 days following the date of issue of the SRP.

• When does the Statement of Reasonable Projection (SRP) have to

be disclosed to PRSA contributors? The SRP must be disclosed to contributors:

(a) annually and it must be in printed form, (b) on request, subject to reasonable notice but the provider may

not require more than 7 days notice, (c) where there is an increase in the number or amount of charges, (d) on the happening of any event to be specified in Regulations.

The SRP must be issued within 7 days of the event at (c) above.

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• Do PRSA providers have to disclose a Statement of Account?

Yes. A Statement of Account must be disclosed to contributors at intervals of not greater than 6 months, and be in printed form only.

• What must the Statement of Account contain?

The Statement of Account must specify, at date of preparation of the statement - the total contributions received since inception of the contract by

the provider in respect of

(a) the contributor; and (b) where appropriate, the employer on the contributor’s

behalf, and

- where a previous statement has been issued

- the total contributions received on behalf of the contributor by the provider (giving a breakdown between contributor and employer, if appropriate) in the intervening period, and

- the transfer value of the PRSA.

• Are reports on investment funds required?

Yes. The PRSA provider must report to PRSA contributors on the performance of the investment funds applicable to the contributors PRSA contract, at intervals of not greater than 6 months.

• Are there disclosure requirements concerning transfers from occupational pension schemes to PRSAs?

Yes. A PRSA provider may not accept a transfer of funds from an occupational pension scheme to the provider’s PRSA unless the transferring member has been given the following details: (a) a certificate setting out a comparison of the benefits which may

accrue from the scheme and the PRSA (Certificate of Benefits Comparison),

(b) a written statement as to why a transfer is or is not in the interest

of the scheme member making the transfer. A person preparing (a) or (b) above must have professional indemnity insurance (details are specified in Regulations).

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• Who provides information in relation to the member’s benefits from the occupational pension scheme?

Scheme trustees are obliged, on request from the member, to provide to the member or the PRSA provider a statement of benefits which may accrue to the member from the scheme.

• When does the Certificate of Benefits Comparison have to be given to the transferring occupational pension scheme member?

This must be given prior to the transfer of the member’s entitlement from the occupational pension scheme to a PRSA.

• Are there any circumstances where a Certificate of Benefits Comparison is not required?

Yes. A Certificate of Benefits Comparison is not required where the transfer value from the occupational pension scheme is in respect of a deferred member and the value - is less than €4,000, or - represents a refund of contributions, or the value of accrued

benefits, to a member whose employment related to the occupational pension scheme is less than 2 years and who has no preserved benefit.

• Do PRSA providers have to disclose any information to the

Pensions Board?

Yes. The provider is obliged to submit to the Pensions Board in respect of each quarter, the following: (a) a report relating to the PRSA business of the provider; and (b) a return relating to PRSA contributors (on an individual basis),

PRSA products and assets to facilitate the maintenance of a statistical database by the Board.

For the purpose of completing the return at (b) above the PRSA contributor, if requested to do so, must inform the PRSA provider of his personal public service number. The intention is to introduce regulations setting out the details to be contained in the documents at (a) and (b) above are set out in Regulations. These documents must be signed by two directors of the PRSA provider.

The provider must also deliver to the Board its audited accounts in respect of each financial year.

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• Will there be a review of the uptake of PRSAs?

Yes. There is a statutory obligation to review coverage of occupational and other pensions (other than Social Welfare Pensions) not later than 3 years after the commencement of the provisions in the Principal Act which oblige employers to provide access and to remit contributions payable in respect of PRSAs

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Appendix PENSIONS (AMENDMENT) ACT, 2002 Tax Rules relating to Personal Retirement Savings Accounts PLEASE NOTE THAT THE FINANCE BILL 2003 PROPOSES TO AMEND THE TAX RULES RELATING TO PRSAs (see below). Tax relief on contributions 1. Contributions paid into a PRSA will benefit from tax relief at an

individual’s marginal income tax rate. There will also be relief from PRSI and the health levy for employees. Where PRSA contributions are deducted by an employer, the net pay arrangement will apply.

Details of this tax relief 2. The maximum annual tax deductible contributions are based on a

percentage of the individual’s net relevant earnings. The allowable percentages rise with age. Members of an occupational pension scheme or of a statutory pension scheme may pay AVC PRSA contributions. Separate rules apply to such contributions - see paragraph 6.

2.1 Relief is allowed against relevant earnings i.e. earnings from a trade,

profession, office or employment. Earnings as a proprietary director or proprietary employee of an investment company are not relevant earnings. Net relevant earnings are relevant earnings less losses, capital allowances and certain payments which reduce a person’s income for tax purposes such as tax effective covenants.

2.2 The maximum allowable contributions are as follows:

Thus, for example, an individual aged 35 can gain tax relief on the lower of • 25% of net relevant earnings

or

• the contribution paid in that year.

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2.3 The 30% limit will apply, irrespective of age, to certain categories of person who typically retire earlier than usual, such as athletes, jockeys and so on.

2.4 Except in the case of an employee who is a member of an occupational

pension scheme or of a statutory pension scheme, a taxpayer is entitled to tax relief on a contribution of €1,525 paid even if this exceeds the normal income-based limit.

For example, if an individual aged 23 earns €9,525, the normal limit on the tax deductible contribution is 15% of €9,525 being €1,430. If this individual pays €1,600, relief of €1,525 will be allowed, rather than the earnings based limit of €1,430.

2.5 An earnings cap of €254,000 will apply also to PRSAs as is the case

with Retirement Annuity Contracts [RAC] for the purposes of tax relief. Thus, for example, where a person is aged over 40, the maximum tax relieved contribution is €254,000 x 30% = €76,200 per year.

2.6 Contributions paid in any year in excess of the maximum tax deductible

contribution may be carried forward and claimed in future years subject to the annual limit for those years. Similarly, contributions paid while out of the workforce may be carried forward and claimed against future earnings on return to paid employment subject to the annual limits.

2.7 The tax relief is non-transferable between spouses in line with existing

rules for RAC and occupational pension scheme contributions. 2.8 Contributions paid after the end of the tax year and before the return

filing date for that year may be claimed for that tax year. The return filing date is 31 October following the end of the tax year - for example for the tax year 2002, the return filing date will be 31 October, 2003.

3. Contributions made by an employer to a PRSA on behalf of an

employee are treated as a benefit in kind of the employee. Such contributions are treated for relief purposes as made by the employee.

For example, where an employee aged 29 contributes 5% of his or her earnings to a PRSA and the employer contributes a further 10%, the employee is treated as making a total contribution of 15% in aggregate. The employee is charged on the employer’s contribution as a benefit in kind and must include this in his or her return of income.

4. Employer PRSA contributions on behalf of employees will be fully

deductible for tax purposes in arriving at the profits or gains of a trade or profession or in calculating management expenses of an investment company.

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Contributions to both an RAC and a PRSA 5. Contributions to an RAC and a PRSA will be aggregated when

calculating the maximum tax relief.

For example, a person aged 45 who gets tax relief on 25% of their earnings on contributions to an RAC may contribute an extra 5% to PRSAs making up 30% tax relief in aggregate.

PRSAs and AVCs 6. Employees in an occupational pension scheme or a statutory scheme

may use a PRSA as an ‘AVC’ vehicle, in other words, additional voluntary contributions may be made to a PRSA. The PRSA must be established under a rule of the main scheme or under a separately arranged scheme, approved by the Revenue Commissioners, which is associated with the main scheme.

The following age related limits will apply to the total of employee contributions to an occupational pension scheme and the ‘PRSA-AVC’:

Such employees also benefit from the ‘tax-free’ employer contribution to the occupational pension scheme which is limited by funding requirements.

Refunds of contribution from occupational pension schemes 7. Refunds of contributions (with interest where applicable) paid out from

occupational schemes may be transferred to a PRSA without a tax charge to encourage pension funding - otherwise such refunds are charged @ the standard rate [currently 20%].

Tax regime in funding period 8. The existing tax regime for pension business will apply to PRSA

business, i.e. there will be tax free growth during the funding period. Position on retirement 9. Benefits can usually be provided at age 60, subject to the same ‘early’

retirement rules that exist at present for the self-employed and employees respectively.

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10. The options available on retirement are similar to the options introduced for RAC holders and certain other persons in Finance Act 1999. Thus a PRSA holder on retirement may take 1/4 of the fund as a tax free lump sum and may:

• invest the balance in an Approved Retirement Fund (ARF)

subject to a minimum investment in an Approved Minimum Retirement Fund (AMRF)

• withdraw the balance in cash subject to a minimum investment

in an AMRF

• invest the balance in an annuity 11. The ability to invest in an ARF is subject to the individual having a

guaranteed pension or annuity from another source of at least €12,700 a year for life. If this is not the case, €63,500 or the balance in the PRSA fund if less, must be transferred to an AMRF or used to purchase an annuity payable immediately. The capital in the AMRF cannot be withdrawn until the individual reaches the age of 75.

12. Similarly, the ability to withdraw the balance in the PRSA fund in cash

is subject to the individual having a guaranteed pension or annuity from another source of at least €12,700 a year for life. If this is not the case, €63,500, or the balance in the PRSA fund if less, must be transferred to an AMRF or used to purchase an annuity payable immediately. The capital in the AMRF cannot be withdrawn until the individual reaches the age of 75.

13. Where the PRSA is used as an ‘AVC’ vehicle (see paragraph 6 above),

the maximum lump sum and pension must be in line with the occupational pension scheme rules.

14. There is no tax charge where the balance is transferred to an ARF.

Instead any withdrawals from the ARF will be subject to PAYE at the marginal rate of tax for the year in which the withdrawal is made.

Taxation of Benefits 15. PAYE will apply to all annuities and other withdrawals from a PRSA

other than

• a tax free lump sum [25% of the fund], • a transfer to an ARF/AMRF,

or

• a transfer to another PRSA, to an occupational pension scheme or to a statutory scheme.

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Death prior to retirement 16. Where the contributor dies pre-retirement i.e. before benefits are taken

from a PRSA, the PRSA fund may pass in its entirety to the estate of the deceased person, free of income tax. Inheritance tax will apply as per the usual rules.

Death post retirement 17. Where the contributor dies after benefits have commenced, the

taxation rules for the PRSA fund will be similar to the taxation rules for an ARF on death.

Interface with RACs 18. Transfers from an RAC to a PRSA will be allowed. Interface with Occupational Pension Schemes 19. Transfers from an occupational pension scheme or a statutory scheme

to a PRSA will be allowed where the 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.

FINANCE BILL 2003 – PROPOSALS TO AMEND TAX RULES RELATING TO PRSAS

The maximum contribution to a PRSA on which tax relief can be obtained has been moved into line with the occupational pension schemes. The original legislation which was published as part of the Pensions (Amendment) Act, 2002 provided that those aged between 30 and 39 could contribute up to 20% of earnings, or 25% for those between 40 and 49 (this was an addition of 5% in each age category on the limits applicable to occupational schemes). Now, the tax relief limits for both occupational schemes and PRSAs are as follows:

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Age Contribution Limit (%) for tax relief Under 30 15% 30 - 39 20% 40 – 49 25% Over 50 30%

PRSA provisions have been changed so that an employee who is only

covered by the employer’s group life assurance scheme can take out an ordinary PRSA into which the employer can contribute. Under the previous legislation, any member of an occupational scheme, even one covered for life assurance but not for pension benefits, could only take out an AVC PRSA. The main difference is that an employer may contribute to an ordinary PRSA but not into an AVC PRSA.