# PRSA and RAC, what's the difference



## Greenhorn (4 Sep 2006)

Hubby has, for several years now a pension fund with Eagle Star, set up by a broker. I thought this was a PRSA, but on checking the Tax Cert issued, I see it's an RAC. What's the difference and is there any disadvantage to the RAC. Help appreciated.


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## ClubMan (4 Sep 2006)

An _RAC _is a _Retirement Annuity Contract _or simply a personal pension plan. There are some differences between these and _PRSAs _particularly with the latter being portable between employments but there are no major disadvantages in my opinion. As long as the charges are OK and the fund selection is suitable there should be no worries.  has some information on personal pensions and _PRSAs _in case you want to try comparing them. The Pensions Board website might also help.


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## Greenhorn (4 Sep 2006)

Thanks for that Clubman. My husband is self-employed and over the last couple of years his contributions have been minimal. He took the policy out about 25 years ago through a very smooth talking broker, who told him that he ould retire at 45 or 50 if he upped his payments regularly! Would I be correct in thinking that, even back then, no such thing could be done?  Could we find out directly from Eagle Star what the costs are, as we really don't want to approach the broker, although he is probably still getting his chare of the payments. Back then I was even more of a Greenhorn!! I'll read up on the links you provided. Thanks again.


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## ClubMan (4 Sep 2006)

_Eagle Star_ should be able to tell you what the charges are. Do they not clarify this on the annual statements? 

25 years of pension contributions to a suitable fund with reasonable charges is a good spell to build up a pension lump sum but it depends on many factors as does whether or not the total amount is sufficient for the individual to retire on.


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## Greenhorn (4 Sep 2006)

No Clubman, I don't think the charges are given on the annual statements. I'll double check this tomorrow. As things stand, the projected pension at age 65 is about €80 per week!! I'm working on the assumption that he'll be eligible for Contributory State Pension. I'm nearly afraid to find out! He started working at age 15 and was PAYE until about age 33. I think at that time Self-employed didn't have to pay PRSI. My fear is that if there's a gap in contributions, his annual average may not be sufficient. I did enquire from Social Welfare a couple of years ago and was told he should be ok, but I'm not so sure. We have also recently purchased a Leaseback in France, but again the income will be about €80 per week. I'm hoping all the little bits will add up to enough to survive on.


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## Azriel (5 Sep 2006)

On the basis that forewarned is forearmed, insurance companies can be very reluctant to provide commission details.


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## Towger (5 Sep 2006)

ClubMan said:


> _Eagle Star_ should be able to tell you what the charges are. Do they not clarify this on the annual statements?


 
Ha Ha. I have one of these for the last 8 or 9 years and the only statement I get from them is a letter every year informing me they are going to increase my monthly payments, if I don't inform them otherwise...

I have a feeling I will be sick if they told me how much they are taking off each payment and charging annually for 'managing' my funds. If it was not for the tax relief I would be much better buying 500 quid of shares at random each month over the internet. 

Towger.


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## ClubMan (5 Sep 2006)

_Towger _- to avoid the issue of charges and hope for the best is not a very good idea. If the charges are high then you could be saving yourself a lot by switching to a more competitive pension provider.


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## Greenhorn (5 Sep 2006)

I've been on to Eagle Star and, understandably, they will only discuss the policy with my husband, who isn't great with figures and anyway isn't here at the moment! My problem is, I've been telling him for a while now that he really needs to put more into the pension fund (he's now 57),that it'll be worth the effort. He's on standard rate tax so I'm beginning to wonder if it really is the best thing to do (he's low income, as he's had to gradually cut back his working hours). Could I assume that the Pension fund is still better than, say, a regular saver account with Anglo Irish at 5.5%?


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## Friday (6 Sep 2006)

If he wants to he can still invest in an Anglo Irish account via his pension fund, e.g. through the new Standard Life contract already discussed elsewhere on this board - and still get the tax break.

As he has a small pension fund the likelihood is that he will pay little or no tax on the fund if he draws it down carefully over a few years.


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## Mininv (7 Sep 2006)

On this topic, does anyone know if you can change a PRSA into an RAC? I have a PRSA, not long established, because I was on an employment contract and it was set up through the company. However, Im probably moving towards being self-employed in 12 months time so an RAC would make more sense from point of view of charges.


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## ClubMan (7 Sep 2006)

I don't think that you can transfer a _PRSA _to an _RAC_. See this [broken link removed] (page 29):


> Portability
> The value of your PRSA can be transferred to:
>  Another PRSA,
>  A company pension plan,
> ...


Bear in mind that, where applicable/possible, any pension transfer/consolidation should only be done in the full knowledge of the implications and, ideally, the benefits accruing (e.g. lower charges, easier administration, wider/better range of funds to choose from etc.). It's not necessarily a problem to have multiple pension funds although it will mean some additional administrative hassle.


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