PRSA ANOMALY

The insurance industry wants the Department of Finance to reverse a perceived anomaly in the Finance Bill that undermines PRSAs, according to The Sunday Times.

The bill introduces an 11% tax on contributions made to PRSAs by employers, which does not apply to occupational pension schemes. The 11% is composed of PRSI at 4% and the new universal social charge (USC) at 7%.

“There’ll be a nasty shock when people realise they’re being charged PRSI and the USC on money that goes into their pensions rather than their pay packets,” said Brendan Johnston, director at Zurich Life.

The Pensions Board estimates more than 60,000 people had signed up for PRSAs by the end of 2009.

“While PRSA contributions are still a tax-efficient way for employers to remunerate employees, the removal of PRSI and USC relief has made an employer contribution to a company pension more attractive than an employer contribution to a PRSA,” said Irish Life.