PRSA tax issue

L

Leabharlanna

Registered User
Messages
23
Hi all,

I am looking for any advice on how I can resolve a difficulty in obtaining income tax relief on PRSA contributions.

A few years ago I set up a small private PRSA to supplement a small occupational pension (both were established around the same time) using an execution-only broker. The choices were either a standard PRSA, which I selected, or a non-standard PRSA. Since its establishment the PRSA operated well and, after the end of each tax year, I have obtained tax relief on the PRSA contributions.

Earlier this year I submitted my tax return for the 2025 tax year and received a tax refund. However, Revenue subsequently asked me to provide a copy of my 'PRSA certificate' and, after it was provided, it indicated that the form was a 'PRSA1' and that what was needed was an 'AVC or a PRSA AVC 2' and that the tax refund should be returned to Revenue.

Nevertheless, Revenue said that I should 'kindly contact the pension provider to discuss linking the contributions with the occupational pension' and that 'the relief will be reinstated upon receipt of the AVC or PRSA 2 AVC certificate'.

So far, despite multiple engagements with Revenue, the PRSA provider and the broker, the matter has not been resolved. Each of the parties are saying that the resolution of the matter rests with one of the other parties (although the PRSA provider now says that I should have taken out a PRSA AVC instead of a standard PRSA).

I would be grateful for any advice on how to resolve this matter; all I want is to obtain the income tax relief on my PRSA contributions which I really need (and when taken together my PRSA and my occupational pension contributions are still well below the allowable Revenue income limits for my age).
 
This occurs very regularly and I am aware of numerous instances where enquiries have been put to Revenue to request that they allow for the reclassification of contributions paid to a PRSA instead of a PRSA AVC in error. Their response of late is that there is no mechanism in the legislation that allows for this.
From the providers prospective they have provided you with the contact that you applied for. This issue, I’m afraid, does occur in the main with many execution only applications. The second most regular issue is where the PRSA holders employment status has changed since taking out the contract e.g person was in non pensionable employment and set up a PRSA. A number of years later they change employer and join an OPS but never change the PRSA to a PRSA AVC. From the providers side it is incorrect of them to issue you with a PRSA 2 cert when you did not apply for an AVC PRSA.

I’m afraid I haven’t come across a clear way to resolve this in the cases I’m familiar with for past contributions paid where Revenue have not granted the relief. Certainly going forward you should cease contributions to the PRSA and arrange to submit an application for a PRSA AVC to correct the position going forward.
 
Did you inform your broker that you were making AVCs from pensionable earnings?

Many years ago I set up an AVC PRSA through a broker.
The pension provider supplied the wrong PRSA certificate, as in your case.

I spotted this immediately, and it was rectified.

Firstly check your PRSA application form. If you don't have this, ask your broker to get you a copy.
 
An AVC PRSA and a PRSA are two very different products, despite some similarities. What you should have contributed to was an AVC PRSA. You went to an execution-only broker and presumably asked them to set you up with a PRSA. As an execution-only broker doesn't provide advice, they set you up with a PRSA as requested.

In the first instance, you should stop contributions to the PRSA and instead start contributions to an AVC PRSA.

You can contact the product provider, explain your mistake and ask them if they will rewind the PRSA and reissue it as an AVC PRSA. They might or might not agree to do this. If they don't, then you could contact Revenue, explain your mistake and that you have attempted to unwind it but the provider won't do that for you. Explain that the PRSA contributions (taken in conjunction with the employee contributions to your Occupational Pension Scheme) were below your age-related tax relief limits. Explain that you have rectified matters as best you can by ceasing contributions to the PRSA and started an AVC PRSA instead. Ask them if they will, under the circumstances give you relief on the PRSA contributions. They might or might not do this.

If neither of the above approaches works, you may just have to put it down to experience and forego the tax relief on contributions made to date.
 
Many thanks for these responses.

I have now stopped making further contributions to my PRSA until this matter has been resolved. As I said each of the relevant parties - Revenue, the broker and the PRSA provider - are saying it is a matter for one of the other parties to deal with. It is like a merry go round and no one seems to want to take the initiative/decision to try do what can be done to resolve the matter; needless to say I will do anything I can or am asked to resolve the matter.

As I say I took out this PRSA around the time my employer first provided an occupational pension scheme (where the employer and employee are contributing 5% of salary which is approx €40k). I was in my early 50s at the time and I just wanted to boost my retirement savings and to utilise some of the available income tax relief for pension contrubitions

However, this issue is now leading me to question the whole idea of the benefits of PRSAs for this purpose. PRSAs were and are being promoted as a good and flexible way of saving for a person's retirement which provide for personal control of the pension scheme, at fixed low cost (if the standard PRSA product is selected) and in respect of which tax relief can be obtained. That is why I set up a standard PRSA. However, I am now finding out that tax relief is not available on a standard PRSA in my situation (even though it was allowed for the first couple of years). No where was it made very explicit that tax relief will not be available on standard PRSAs in my situation and that a different product is required; indeed even looking now at the relevant Revenue information page (https://www.revenue.ie/en/jobs-and-pensions/pension/products/index.aspx) this is still not clear (AVCs are only mentioned in the context of occupational pension schemes). This is all becoming a very complicated matter for what is supposed to be a simple way to save for retirement.

I will keep trying to sort out the matter but it is wearing me down at this point; but thank you to those that have responded and the points made are very much appreciated even if they do seem to suggest that I have not much hope in securing a positive outcome.
 
You could try an appeal to the appeals commissioner or maybe the ombudsman (if is in legislation they probably won't take it on)

My limited knowledge suggests @LDFerguson post above is spot on though
 
PRSAS are a great vehicle for funding for your retirement however it seems you did select the wrong contract. This is a risk with the execution only route as the responsibility for determining the suitability of the product lies with you.

Pensions are complex (rightly or wrongly so) and in my opinion there is an argument to have them excluded from execution only services to prevent issues such as this.

You probably now also need to start considering how this impacts on how you will be accessing your pension benefits in retirement. Your PRSA as it stands at the moment is not linked to your occupational pension scheme. This can be a good thing or bad thing depending on your own circumstances. For example, if your intention was to use the AVC to fund a gap in the tax free lump sum (say if you were in a public sector scheme or DB scheme) then you would have an issue.
I’m assuming you work in the private sector and your occupational pension is defined contribution. If you are intending going the 25% route then the existing PRSA might be ok if left paid up as it is. You would have flexibility of drawdown from that fund whereas the AVc would have to matured at the same time as the main scheme benefits.

This is one where you might now need to engage with a suitably qualified financial broker / planner to review this for you.
 
Leabharlanna said:
However, this issue is now leading me to question the whole idea of the benefits of PRSAs for this purpose.
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They are. In particular AVC PRSAs in your case. The fact that you unfortunately selected the wrong option (PRSA instead of AVC PRSA) doesn't alter the fact that PRSAs are a good option for funding retirement for many people.
 
mmclo said:
or maybe the ombudsman
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The Ombudsman won't look at it, as the PRSA provider and the broker did nothing wrong. It was the customer who made the mistake by setting up the wrong product - a PRSA instead of an AVC PRSA - so I do think that the best course of action is to acknowledge the mistake and ask the provider and/or Revenue will they overlook the mistake and help out. Neither is under any obligation to help, but you might catch someone having a good day.
 
LDFerguson said:
As an execution-only broker doesn't provide advice, they set you up with a PRSA as requested.
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I thought EO brokers don't provide advice on what funds/assets to invest in, but could give general advice on the pension structure and implications?
 
Corola said:
I thought EO brokers don't provide advice on what funds/assets to invest in, but could give general advice on the pension structure and implications?
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An execution-only service involves no advice on choice of product, choice of provider, choice of funds, suitability of a particular product to one's needs etc. No advice whatsoever. If asked a question of fact, like "What are the charges on this product", that's fine. But not advice on what you should do.

Aside from myself, I know a couple of other execution-only brokers and both are highly ethical operators. I have no doubt that they would stop a customer from making a mistake like this if they knew. But - and I'm speculating here - if a customer contacted an execution-only broker and said "I want to start a PRSA with XYZ company", they would do it without knowing that the customer is already in an Occupational Pension Scheme and therefore making a mistake.
 
JoeRoberts said:
No idea. But if it is a regular confusion it deserves some action
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I had a look at the forms for Royal London and Standard Life. There's nothing about it (other than a line saying that a PRSA AVC needs to use a different application form). It seems that I was thinking of the questions about employment status.
 
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