PRSAs become legal obligation in just 10 days

The countdown is on for employers to inform their staff about their rights to have their PRSA contributions deducted from their payrolls, writes LauraSlattery.

Numerous surveys claim many people have never heard of them but in 10 days' time, Personal Retirement Savings Accounts (PRSAs) become part of employers' legal obligations to their employees.

After the mandatory pensions access deadline of September 15th, employees with more than six months' service who are denied access to a company pension scheme can ask their employers if they can contribute to a PRSA. If employers say no and refuse to deduct PRSA contributions from payroll, they will have broken the law.

The Irish Financial Services Regulatory Authority (IFSRA) has reminded employers who have not yet informed their staff about their right to contribute to a standard PRSA that they should use the regulator's consumer fact sheet as part of their presentations to employees.

IFSRA's fact sheet has been distributed to all financial institutions and is available from the regulator through the lo-call number 1890 777 777 or at www.ifsra.ie.

"It is the end users of the PRSA who need to be satisfied with the product they are getting," a spokesman for IFSRA said. However, he added that it was "no harm" for employers to examine the fact sheet, which stresses that standard PRSAs rather than the higher charge non-standard varieties, are suitable for most people.

Earlier this week, the Minister for Social and Family Affairs, Ms Coughlan, said it seemed to be "the nature of the beast" that many employers would wait until the deadline before fulfilling their obligations.

One move that may assist employers leaving it to the last minute was announced this week by PRSA provider Canada Life, which has set up a website that it claims allows employers to comply with the legislation in just three minutes.

Another provider, Eagle Star, allows intermediaries to complete application forms for its "one-stop standard PRSA" on behalf of employers online.

But the Canada Life site, www.easyprsa.com, targets employers directly, allowing them to print off the Section 121 Certificate of Appointment they need to cross the immediate legal hurdle they face. However, a Canada Life spokesman said employers needed to do more than just appoint a provider and pin up the documentation on the staff notice board: they should also facilitate employees who need advice.

Canada Life is not offering to give financial advice over the internet, but is helping employers who want to "get started" on the road to meeting their statutory obligations. Canada Life argues that without online services there is not enough time left for the majority of the 170,000 registered employers to sign up to a PRSA before September 15th.

"There simply is not enough financial advisers to go around," a spokesman said.

Mr Pat Ryan, head of pensions development at Canada Life, said the September 15th deadline was about a wider issue than just PRSAs. "Most employers will want to discuss with their pension advisers whether staff schemes or PRSAs best fit their requirements," he said.

Mr Dave Swanton, marketing director at Bank of Ireland Life, confirmed that business for traditional pension schemes was "very strong" at the moment.

Over 200 employers a day are appointing the bank as a PRSA provider, but Mr Swanton said most of the work would start later, when providers seek to convince employees to contribute. "The presence or absence of an employer contribution is hugely relevant," he said.

In the UK, a survey by the Association of British Insurers showed that where employers do not contribute to pensions, there is only a 13 per cent take-up rate by staff. Where employers make a 5 per cent contribution, this rate rises to 69 per cent of employees.

However, only 9 per cent of UK employers contributed to the British equivalent of PRSAs - stakeholder pensions - on behalf of employees. These pensions have since been branded a failure by the insurance industry there.

The Minister, Ms Coughlan, told The Irish Times that the Government hoped to learn from the mistakes made in the UK. If employees do not take employers up on the offer of PRSAs, compulsory employer contributions will be considered.