PRSA or personal pension?

[Brendan Burgess]

Are there any practical advantages of one over the other?

PRSAs are supposed to be more suitable for people on career breaks, because they can defer their tax relief. However, it's still not a good idea for someone to contribute to any form of pension while they are not paying tax at the top rate.

PRSAs can theoretically accept transfers in from other schemes, but personal pensions cannot accept such transfers. But, in practice, PRSA providers are not willing to accept such transfers for administrative reasons.

Tax and PRSI reliefs - no difference in treatment anymore.

Charges - Discount brokers seem to charge the same for both.

Brendan

 

[geegee]

Hi Brendan,

However, it's still not a good idea for someone to contribute to any form of pension while they are not paying tax at the top rate.

Further to my other query to which you responded, is your rationale for the above that it would be classed as tax deferral rather than tax avoidance?

Regards,

gg.

 

[Brendan Burgess]

Hi geegee

When you contribute to a pension you save tax at your marginal rate.
When you draw down that pension as an income, you pay tax on it at 75% of your top rate.

So, you could save tax at 20% now, only to find yourself paying tax at 31% on the proceeds when you retire. This makes no sense at all.

Add to this the inflexibility of pensions and the uncertainty of what might happen in many years when you retire, it's just not a good idea.


Brendan