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PRSAs
 
            

PRSAs

 
 

Personal Retirement Savings Accounts (PRSAs): This is a special type of personal pension policy that is designed to be more flexible than the traditional Personal Pension Plan. Anyone up to age 75 can take out a PRSA. You don’t have to be earning an income, (although you won’t get tax relief on your contributions unless you have an income).

How much will I get when I retire?

All Personal Pension Plans and PRSAs are set up as defined contribution plans. This means that the value of your pension at retirement can only be estimated. It depends on the level of contributions paid in, the growth of your pension fund and the charges you have paid. You may have to pay income tax on any pension benefits you claim.

Indexation

If you pay a regular (monthly) contribution, your pension provider may automatically increase your contribution each year, at a fixed rate or in line with price increases generally, unless you tell them you don’t want to. This is called ‘indexation’.
Most Personal Pension Plans and PRSAs allow you to pay regular monthly contributions (a regular contribution plan) or lump sums (a single contribution plan), and sometimes both.

How much should I contribute?

With a Personal Pension Plan or PRSA, you have to decide how much to contribute in order to give you the income you will need when you retire. Let’s call this your ‘pension target’. The chart below shows that the older you are when you start saving, the more you need to save each year to reach your pension target.

How much you need to contribute each year (before tax) to reach your pension target

Pension Target

Age Now

         25

            35

         45

20000

3600

5200

8600

26667

6000

8800

14400

33333

8400

12300

20200

40000

10800

15800

26000

Source: Society of Actuaries. Assumes a pensionable age of 65, pension increases each year of 2% and a pension for the surviving husband or wife of 50% of the main pension, to be paid when the main pensioner dies. Charges are deducted as per a standard PRSA, i.e. a 5% contribution charge and an annual management charge of 1% of the fund.

 
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