PPP/PRSAs for the self-employed & employees with no occupational pension available

State pensions have long since been recognised as not being adequate to provide sufficient income for you when you retire Michael Hannon Financial Services will help you provide you with the most suitable supplementary pension arrangements to ensure you enjoy a comfortable lifestyle during your retirement from working life.

Pensions are long term savings plans which provide a fund in retirement to provide a guaranteed income for life. The main differences between pensions and savings plans is that under pension plans you receive tax relief on your contributions, tax free investment growth and tax free cash at retirement.

The personal contributions you make into a Personal Pension or PRSA are subject to limits as a percentage of your salary for tax relief purposes and Michael Hannon Financial Services can discuss these with you.

The current Maximum tax relief limits are:

Age attained Max contribution as % of NRE
Up to age 29 15%
30-39 20%
40-49 25%
50-54 30%
55-59 35%
60+ 40%

A Personal Pension Plan is a private pension policy that is managed for you by a life assurance company or by an investment firm. Such a plan can be taken out by individuals who earn an income but who are unable to join an employer plan or people who are self-employed.

A Personal Retirement Savings Account (PRSA) is an investment vehicle used for long term retirement provision which has more flexibility than a traditional personal pension policy. PRSAs can be taken out by the employed and the self-employed, and for the employee who moves job the PRSA can move with you from job to job.

People under the age of 75 can take out a PRSA. It is not necessary to be earning an income in order to take out a PRSA.

If a person is employed, the law requires the individual's employer to offer him or her a Standard PRSA if:

  • There is no occupational pension scheme providing retirement benefits for the employees at present or
  • There is an occupational pension scheme for retirement benefits but the membership is restricted to certain employees or there is a waiting period of over six months from the date of commencing employment
  • The person is eligible to join the scheme from day one but only for death in service benefits, not pension benefits.

With a Personal Pension plan or PRSA Michael Hannon Financial Services will help you decide how much to contribute to give you the income you need when you retire. This is your 'pension target'. The older you are when you start your pension the more you will need to save each year to reach this target.

What happens when I retire?

Retirement funds for PRSAs and personal pensions cannot normally be accessed until at least age 60 with exceptions for certain occupations like professional sports people or if you have to retire due to serious ill health.

When you retire, you can immediately take 25% of your retirement fund as a tax-free lump sum. You can use the rest of your fund to buy an annuity which gives you an income for the rest of your life (See Annuities), or those who already have a secure pension income from other sources of at least €12,700 a year, also have the option of taking:

  1. The remaining 75% of their fund as taxable cash, or of
  2. Investing the remainder in an Approved Retirement Fund (See ARF/AMRF Section)

People who do not already have an annual pension income of at least €12,700 (including state pension income) and who do not wish to invest the remaining 75% in an annuity may invest up to €63,500 in an Approved Minimum Retirement Fund to the age of 75. The balance can then be invested in an ARF or can be taken as taxable cash. Please note that anyone who has a PRSA (including employees) can access the ARF/AMRF option. Michael Hannon Financial Services will also research the market for the most suitable pension and investment options available to meet your retirement needs and objectives.