Tremendous opportunities arise from a changing pension landscape

Is there ever a dull moment in pensions? 

In the last couple of years alone, we’ve witnessed the removal of new Executive Pensions from the market, the introduction of new Master Trusts as a suitable IORPS II-compliant alternative, and then, out of the blue in January 2023, the imposition of a BIK tax liability on employer contributions to PRSAs was removed.

As a direct result of the removal of this BIK, the PRSA is now hugely attractive for company directors and is a ridiculously simple product compared with any kind of occupational vehicle.

Basically, PRSAs can now accept any level of employer contributions, and such contributions are not linked to either salary or service (although a Schedule E salary is required). Both annual premiums and single premiums made by the employer to a PRSA can be claimed against corporation tax in the company year in which they are paid. Furthermore, should a client die before retirement, the full value of the PRSA is payable to the client’s personal representatives without any caps, limits, or restrictions. As if all of that wasn’t  enough, PRSAs are not trust-based products, and consequently, no trustees are required, and PRSAs are not impacted by IORPS II regulations.

PRSAs can also facilitate a phased retirement where, unlike company schemes, you do not have to draw down all PRSAs for the same employment at the same time. Retirement benefits from a PRSA can be taken at any time between ages 60 and 75. This gives clients a fifteen year period where they can manage the income taken from their PRSA gradually based on their income needs rather than being forced to take it all at once. The added benefit is that PRSAs which have not been vested retain their pre-retirement death benefit.

There are numerous factors that will go into determining how much income and lump sum clients need and therefore how PRSAs should be accessed for example, are they still employed, full-time or part-time, are they retired, are they receiving State Pension, what other income and assets do they have, is their spouse working etc. This is an area we in Irish Life believe will grow and where clients will need ongoing advice. Brokers can offer a new level of flexibility to their clients in advising and supporting them throughout their retirement journey.

It’s important to highlight that the PRSA is not the perfect product, even with these positive changes. It does have a couple of drawbacks, namely that you cannot fund for a lump sum based on salary and service and the early retirement rules are more restrictive than company pensions (To qualify for early retirement from a PRSA, you must be retired from all employments and self-employments).

Despite this, the flexibility of PRSAs outweighs any limitations. They are firmly in the spotlight, especially among business owners, increasing the demand for expert advice.

At Irish Life, we are dedicated to supporting brokers with the necessary technical and sales support to thrive in this environment and help them grow their business. We are excited to announce the expansion of our PRSA offerings with the introduction of Complete Solutions PRSA Plus. This addition complements our existing Complete Solutions PRSA product range providing more choice, greater pricing flexibility and access to high-performing funds from our four investment partners, Irish Life Investment Managers, Setanta, Amundi and Fidelity. 

If you need support or would like more information on our Complete Solutions PRSA Plus or our full PRSA offering please contact your Irish Life account manager or learn more here.