the lowdown on PRSAs
THE jury still seems to be out about whether PRSAs have really kept charges low since their introduction in 2003.
The recent report by the Department of Social Protection on pension fund charges revealed that such charges eat away up to nearly one-third of the value of a pension fund in the case of PRSAs and executive pensions. The figure for occupational pensions is significantly lower, at about 18pc of fund values.
But few would argue that it's a simpler product than many personal pensions and even occupational ones. It's been suggested that more people would take out pensions of any kind if they were much simpler and easier to understand; perhaps a product not unlike the hugely popular SSIAs of a few years ago.
However, David Malone, head of operations at the Pensions Board, says that, as well as encouraging more folks to start a pension in the first place, there is a huge need to make sure that those who have them are contributing enough.
"There are a lot of people out there who have pension coverage, but it's inadequate. The real question is, are you contributing enough into your pension fund to meet your expectations of retirement?"
Mr Malone says there are lots of people in all sorts of pension arrangements – whether occupational schemes or private pensions – but there is something of a "disconnect" between the individuals and how their schemes work.
"What the [DSP] report is saying, effectively, is that pensions are expensive; charges and fees have a big impact on the value of your pension, but, in some cases, charges are high, in other cases they are low, and that's true for individuals as well as occupational schemes.
"The underlying point is that both trustees of schemes and individuals need to engage with their pension and all its elements. Is it adequate, what are the fees and charges, and will it meet my needs at retirement?"
Irish Independent Supplement