Vested PRSA Vs ARF - whats the difference?

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redstar

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While reading Irish Lifes Standard PRSA Policy guide - options available on retirement i saw these among the options....

"
Leave the fund in the PRSA taking withdrawals as you want

or

Invest in an ARF taking withdrawals as you want."

What are the benefits of choosing the Vested PRSA over an ARF (or vice versa). Whats the difference ? They seem to have the same rules regarding withdrawals and taxation.

Is it that remaining in the PRSA (ie vested) means you stay with the same provider (and funds selection?) whereas you can choose to buy an ARF from any other provider?
 
redstar said:
Is it that remaining in the PRSA (ie vested) means you stay with the same provider (and funds selection?) whereas you can choose to buy an ARF from any other provider?
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That's one difference. You can still switch funds within a Vested PRSA, but only from the menu on offer by the provider.

redstar said:
They seem to have the same rules regarding withdrawals and taxation.
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They do.

Another difference is that up to recently, annual charges on a PRSA were typically 1% per year or more. A Vested PRSA would keep the existing charges. An ARF can usually be arranged with annual charges of less than 1% so that's something to look out for.

That said, some of the newer breed of PRSAs that have launched in the past couple of years offer charges lower than 1% per year, so the lines between ARFs and Vested PRSAs are starting to blur.
 
So the main differences are charges and fund choices available.

My employers Group Standard PRSA has charges of 1% AMC and 4% of each contribution.
I'll shop around when the time comes.
 
I wonder is that Irish Pensions and Finance? If you go through them there's a 4% charge on lump sum contributions but no charge on regular contributions through payroll.

Either way I suggest you to shop around now, not when you retire and are looking for an ARF.
 
Its not great - its our employers group PRSA scheme (via Irish Life) - i suppose it covers the fact we have access to advice too, and 'an annual review' (ie increase your contributions). I haven't availed of that though.
 
Can you just contribute to that to the extent that they match your contributions but do AVCs separately via your own better priced PRSA?
(I don't know if that's possible in general).
 
redstar said:
My employers Group Standard PRSA has charges of 1% AMC and 4% of each contribution.
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My employer had an arrangement with a similar set of fees (many years ago). They took advice from independent financial advisors, and went shopping around. They got a lower AMC, and no contribution charge.

I realise it's not really within your control, but it would be worth advocating with your employer to get proper financial advice on this.
 
kickstart said:
My employer had an arrangement with a similar set of fees (many years ago). They took advice from independent financial advisors, and went shopping around. They got a lower AMC, and no contribution charge.
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Same, except we didn't even engage any financial advisors, we just shopped around and now have Master Trust with 0.65% AMC and 0% on contributions.
 
Interesting insights from previous posters. Thanks!

I would likely have little influence over my employer as these decisions are made at corporate level - its far from the board-room i was reared!

I'll have a go though - they should at least review if we are getting value for money from the pension providers.

My employer contributes 5% of my salary to the PRSA, so i suppose that offsets the charges somewhat, and i'm almost maxed out at my own age-related contributions.
 
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redstar said:
My employer contributes 5% of my salary to the PRSA, so i suppose that offsets the charges somewhat, and i'm almost maxed out at my own age-related contributions
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Does that mean the actual contribution you get is 4.8% after the provider gets their cut?
 
As a follow-on question - if I leave my current employer (ie retire early) but I don't want to access any benefits from the group standard PRSA yet, does it just remain as a PRSA - untouched - or does it become vested automatically, which means benefits have to be taken. I am 61.
 
redstar said:
As a follow-on question - if I leave my current employer (ie retire early) but I don't want to access any benefits from the group standard PRSA yet, does it just remain as a PRSA - untouched - or does it become vested automatically, which means benefits have to be taken. I am 61.
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It doesn't vest automatically when you leave the employer. It stays as a normal / unvested PRSA until you choose to vest / retire it which can be any age up to 75.
 
Thanks ! I have also asked our pension provider but it usually take a week to get an answer !
So basically i should be able to just let it sit (up to 75) without adding contributions or taking from it (no imputed distribution either?) until I decide to vest it.
 
redstar said:
I would likely have little influence over my employer as these decisions are made at corporate level
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The bosses will likely be paying the same fees as you (and on larger pension balances they make an even bigger difference), so they might be more open to the suggestion than you imagine.
Why were my company originally (before we shopped around) paying such high fees? Because we didn't know we could shop around, didn't know lower fees were available and never imagined that you could just contact the various different Master Trust providers yourself and ask for a quote.
 
redstar said:
So basically i should be able to just let it sit (up to 75) without adding contributions or taking from it (no imputed distribution either?) until I decide to vest it.
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Personal Retirement Savings Accounts (PRSAs)

This page gives information on Personal Retirement Savings Accounts (PRSAs)
www.revenue.ie www.revenue.ie
You can take benefits from a PRSA from age 60. The PRSA holder may draw down funds from their PRSA as they wish. A PRSA is deemed to vest when the holder reaches age 75, but drawdowns are still allowable after this occurs. A vested PRSA becomes subject to the imputed distribution regime.
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