RAC vs PRSA

[gsecoo]

Hi,

I'm looking for some advice here regarding the title of this thread.

Some background on myself, I am 31. I had been working in a permanent job with my employer paying into a pension. I had 20,000 in the pension last year when I left the job. I transferred the funds from that company scheme into a personal retirement bond with aviva. At the time I had done some research and read this was the best thing to do. Was I correct in that decision?

Anyway, I started working last year as a professional contractor in my profession. I have been setup as a director of an umbrella company. At the time I started contracting I spoke with a financial advisor from a very well advertised crowd and they suggested setting up a retirement annuity contract (RAC) since I wasn't going to have any employer contributions to the pension. Tbh, I didn't fully research these at the time and took their advise. I have been contributing 500 euro a month to this for the last 18 months or so. I am getting the usual 40% tax relief.

I was looking at some information on the website of the accountant I use for the umbrella company this week and noticed that since January 2023 that I could have been availing of 52% tax relief as contributions can be made from the umbrella company to the pension. I enquired with my accountant today and they said I would need to setup a PRSA to avail of the 52% tax relief and make employer contributions.

I was doing the maths on it and I could increase my contributions to around 700 euro per month and when getting 52% tax relief it wouldn't be far off the net amount 500 euro per month is costing me now.

What are the pros and cons of a RAC vs PRSA apart from the higher tax relief that I can avail of?

Any input would be welcomed.

Thanks in advance

 

[ClubMan]

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[GSheehy]

Was I correct in that decision?

No idea as you haven't told us what you moved from, what the costs/funds were under the old scheme and PRB now. The advisor who transacted this for you would have given you a suitability letter (reasons why he/she was advising you to go this route). Do you have that? What does it say?

a very well advertised crowd and they suggested setting up a retirement annuity contract (RAC)

Again, what does the suitability letter say as to why they advised on an RAC? Why not PRSA or Executive Pension? You were eligible for all 3. They weren't to know of the changes to PRSAs from 01/01/2023 but you probably should have got some taxation advice (elsewhere) on the company Vs personal contributions.

In the advisors defence, as we don't know the full details of the original transaction (what information you gave him/her to arrive at the RAC conclusion), the advice may have been solid at the time.

I was looking at some information on the website of the accountant I use for the umbrella company

Link?


Gerard

www.prsa.ie