Occupational pension schemes and PRSAs

Since September 2003 all employers (if they do not already run an Occupational Pension Scheme) must provide their employees with access to a Personal Retirement Savings Account (PRSA).  A PRSA is a new, portable, flexible and cheap pension product, which can move with the individual from employment to employment.  While the establishment of an Occupational Pension Scheme is a voluntary act on the part of the employer, since the coming into force of the Pensions (Amendment) Act, 2002 it is now mandatory for employers to provide all employees with access to at least one PRSA arrangement whenever:

  • the employer does not provide an Occupational Pension Scheme, or;
  • where such a Scheme is provided, but in which eligibility for membership is limited, or a waiting period of more than six months is imposed from the commencement of the member’s employment, or;
  • where such a Scheme does not provide for an additional voluntary contribution (AVC).

An employer does not have to establish a PRSA Scheme on behalf of its employees but must provide access to one through a PRSA provider should the above criteria apply.

In practical terms providing access means:

  • entering into a contractual arrangement with at least one PRSA provider to provide PRSAs for employees;
  • notifying employees of their right to contribute to a Standard PRSA;
  • allowing the PRSA provider or their intermediaries reasonable access to the workplace and to employees for the purposes of concluding Standard PRSA contracts;
  • providing employees with reasonable periods of paid absence to allow them make arrangements for the establishment of a Standard PRSA;
  • making the necessary payroll deduction arrangements allowing contributions to be channelled into a Standard PRSA.

Once an employer has complied with the obligations outlined above their liability with regard to performance of a Standard PRSA is limited.  Section 121(7) of the Pensions (Amendment) Act, 2002 provides a statutory indemnity to employers safeguarding them from liability for the investment performance of Standard PRSAs.  An employer is merely obliged to ensure that the PRSA product is approved under the legislation and this can be done by checking with the Pensions Board.  Additionally, an employer is under no obligation to make any contributions to the PRSA on an employee’s behalf, although the employer may choose to do so as part of the employee’s remuneration package.

Cormac Lynch