Irish Life became the third company to enter the market for Personal Retirement Savings Accounts (PRSAs) this week with the introduction of two products, PRSA Standard and PRSA Performance.
Irish Life will sell its PRSAs through its direct sales force, its network of independent brokers and branches of Permanent TSB and began its advertising campaign this week. Its corporate business division has also developed a range of PRSA packages for medium to large companies.
PRSAs are a new low-cost and flexible type of pension not tied to any one employer. They are designed to increase the proportion of employees and self-employed people with a private pension from 50 per cent to 70 per cent. They can also be used by carers, homemakers and unemployed people as a way to save for retirement.
Irish Life's Standard PRSA will invest contributions in the company's Consensus Fund. This fund reflects the choices of all fund managers operating in Ireland, thus promising to match the average investment performance and eliminating the risk of selecting an underperforming fund manager.
Charges on all standard PRSAs are capped by the Pensions Board at 5 per cent of customers' contributions and an annual management charge of 1 per cent. This management charge reduces by 0.05 of a percentage point once the fund reaches 150,000 and by the same amount if it reaches 250,000 and 500,000.
PRSA Performance is Irish Life's non-standard PRSA, which offers a specialist range of fund choices for sophisticated investors in exchange for a higher annual management charge.
Annual management charges on PRSA Performance vary. On 13 of the 18 funds available, the charge is 1.35 per cent, 0.1 of a percentage point higher than Bank of Ireland Life's non-standard PRSA, the only other non-standard product currently available on the market.
On Irish Life's Guaranteed Fund, the charge is 1.6 per cent, on its KBC Asset Management Fund it is 1.7 per cent and on its Secured Performance Fund it is 1.85 per cent. The most expensive funds are the Fidelity Managed International Fund and the Fidelity European Fund, which have annual charges of 2 per cent.
With PRSAs, holders are free to stop and start contributions at any time and can pay a minimum of just 300 into their fund every year.
However, Irish Life is offering some incentives to people who build up a substantial fund through regular contributions over the years. After 10 years, and every five years after that, the company will add a bonus of 1 per cent for funds over 100,000, 2 per cent for funds over 200,000 and 3 per cent for funds over 300,000.
These bonuses are not available to people who save for retirement by making one-off premiums each year. Self-employed people often invest in pensions by calculating the maximum they can contribute tax-efficiently to their fund in advance of their annual tax deadline.
However, the management charges will be 0.35 of a percentage point lower for single-premium PRSA Performance customers than those mentioned above. The charge also reduces by 0.05 of a percentage point once the fund crosses certain thresholds.
l Friends First will begin selling PRSAs from next week, following its approval as a provider of the new type of pension earlier this week. The Pensions Board gave Friends First approval for two standard PRSAs and four non-standard PRSAs. The company's range of PRSAs will be marketed under the name Pensions First Retirement Savings.
The company is the fourth entrant to the market, after AIB, Bank of Ireland and Irish Life.
