# Key Post: PRSA vs. Occupational Pension Scheme



## Brendan Burgess (7 Dec 2005)

I thought I had done a key post on this but I can't find it. Is this a correct summary?

If you are an employer setting up a pension fund for employees, you should consider both options.

If you are an ordinary employee with a choice of joining your employer's scheme, then this will be relevant to you. 

If your employer contributing to a defined benefit or defined contribution pension scheme, that will usually always be better than a PRSA. 

If you are a 5% director, there are other options and this guide is not appropriate to you.

*PRSAs*
The big advantage is that you can put the proceeds into an ARF.

In general they are more flexible. 

The tax-free lump sum on retirement is 25% of the fund

There is an option to do a Self Administered PRSA (through Custom House Capital) 

*Occupational Pension Scheme*
Can be cheaper. On a nil commission basis, the charges are 101% allocation + .75% annual charge vs. 100% allocation and 1% annual charge for a PRSA.

An employer has no effective limit on an Occupational Pension Scheme, whereas the combined contribution to a PRSA is limited to, say 20% for an employee aged between 30 and 40.

The big disadvantage is that, under current rules, the employee must buy an annuity on retirement. 

At retirement, the tax-free lump sum is 1.5 times final salary.


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## Conan (7 Dec 2005)

*Re: PRSA vs. Occupational Pension Scheme*

Brendan,
your summary, as far as it goes, is correct.
BUT,
if one is a 5% Director the ARF facility (and the 25% tax free lump sum) is also available under the Occupational pension scheme structure.

For an "employee" (as opposed to a 5% Director), it may be that the PRSA offers more flexibility (ARF etc), subject to the contribution limits.

For a 5% Director however, the Occupational Pension Scheme is better as it allows a higher rate of contribution from the Company (no 30% limit).


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## Summer (7 Dec 2005)

*Re: PRSA vs. Occupational Pension Scheme*

Brendan,
Could you please include AVC's in your key post. Can they be used independently for an ARF?
Thanks
Summer


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## Brendan Burgess (7 Dec 2005)

*Re: PRSA vs. Occupational Pension Scheme*

Hi Conan

Thanks for that. I have edited the post to show that it does not apply to 5% directors. 

Hi Summer

This particular post is very specific - it is to arrive at a decision which is best for an ordinary employee - a PRSA or an Occupational Pension Scheme. It is not meant to be a comprehensive guide to pensions. I think you will find AVCs addressed elsewhere on the site.

Brendan


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## ajapale (7 Dec 2005)

*Re: PRSA vs. Occupational Pension Scheme*

Hi Brendan,

I hope Im not being pedantic here but I think you are comparing PRSA's and Defined Contribution Occupational Pension Schemes.

aj


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## Brendan Burgess (7 Dec 2005)

*Re: PRSA vs. Occupational Pension Scheme*

Thanks AJ

Again, I have clarified the original post, just in case someone passes up on the opportunity of joining a pension scheme where the employer is making a contribution. 

Brendan


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