Company Pension Scheme & PRSA

[Oirishfruitie]

Any info please.

I have a PRSA since 2014. I pay 500 Euro from my salary (employer does not contribute) per month. I top up annually, with a once off payment to make the most of the tax relief benefit.

My company has just informed me that they are introducing a pension scheme, in which they have "committed to matching contributions" to the plan.
I don't have any other info about the work pension scheme yet.

In advance of a meeting to find out more, I was just wondering:

• Can I continue to have the PRSA and sign up for the company pension?
• Is my tax relief affected?
• If I can't do both together, am I better off moving the PRSA across to the company pension? Or leave it, and start paying into the new company pension?

I know there's not much info on the company pension yet, but I just want to get some thoughts prior to meeting.

Thanks

 

[LDFerguson]

I'm assuming that your employer is your only source of earned income. I'm also assuming that your employer's new pension scheme is an Occupational Pension Scheme as distinct from a group of PRSAs.

Those being the case if you join the new employer's scheme, any additional contributions you make would need to be to either the scheme's AVC facility or your own AVC PRSA. Both confer the exact same benefits in terms of tax relief, options at retirement etc. Which is better? You'd need to compare (a) the charges on the scheme's AVCs with those on an AVC PRSA and (b) the choice of funds available on either side. Then you'd have enough information to make a decision.

It's possible for you to transfer your existing PRSA fund into the new scheme. Again - compare (a) and (b) before deciding to do that or not. On this one, there's a third consideration that if you keep the PRSA fund separate then in theory you could retire it and access funds at a different time to the pension scheme.

Regards,

Liam
www.FergA.com

 

[Persius]

If you join the company scheme, then I don't think you can continue to claim tax relief on your contributions to your existing PRSA.
As Liam mentions above, you'd need to take out an "AVC PRSA". The difference is from a tax perspective. You can claim tax relief on contributions to the AVC PRSA. But if you leave your current employment, then you should stop contributing to the AVC PRSA as it's linked to the occupational scheme of your now previous employer.

TBH, I think it's too much hassle. I would just cease paying into your current PRSA and put all contributions through the company scheme. Most likely the company scheme charges are lower than the PRSA charges. And you don't have to do everything through payroll. You can, say, choose to make 10% AVCs through payroll (where you get tax relief at source) and you can make additional AVCs directly to the pension company, and claim tax back at the end of the year. I believe nearly all pension funds allow you to make such irregular AVC contributions. But check it with them just in case.

 

[Oirishfruitie]

Thanks both for your very informative feedback.

I have a bit more info, that had me almost decided, but then that raised a couple more queries!

Current PRSA. Management charge 1%. Allocation rate 96.5%. So costs are high enough. I can't change that plan into a PRSA AVC, so I'd have to open a new one.

Company pension. 4% contribution from employer. 2 year vesting period. 0.6% Management charge. All other charges by employer.

So I am thinking to move funds across to company pension and sit tight for 2 years anyway!

Then I got thinking. The auto-enrolment may be in place by the end of the year? And the % of employer contributions, although small at the start, will increase. I guess my question back to my employer would be, would there be scope for increasing that 4% over the years if I'm still with the company. Also, why put in place a company pension so close to the auto enrolment? Simple question; better off going with company pension than waiting for the auto enrolment? I'm assuming the same rules will apply to my PRSA if one were to join the auto enrolment scheme.

Thanks again

 

[Persius]

I think the company pension gives you more flexibility in terms of retiring it earlier or choosing your funds. Also, I think the 40% tax relief in the company pension is better value than the state contribution to the new auto-enrollment pension, assuming that you're a higher-rate tax payer.
And finally, we don't know when the new scheme will actually come in. Also, and you need to check this, I think a company that already offers an occupational scheme doesn't have to offer the auto-enrollment scheme to new hires. But I could be wrong on this.