Opening up third pillar market

The long awaited Irish Pension Bill was finally published in July last year, providing for the introduction of Personal Retirement Savings Accounts (PRSAs).
This new step was welcome by the industry as a good means of promoting the further development of the Irish market for retirement. There had been criticism, though, regarding the complexity of the new framework and of the danger that over-regulation of the pensions environment could bring to occupational pension schemes.
The introduction of the PRSAs will open the market to providers other than life insurance companies, although so far, it is uncertain how many investment houses will be joining the new individual retirement system. Under the new framework, only private companies registered in Ireland and licensed by the Pensions Board will be allowed to offer PRSAs solutions.
As it happens in the UK with the stakeholder pensions, managers can only charge a 1% annual management fee. “This, and the fact that there will be no charges for those switching funds would have important implications in the Irish fund management industry,” says Joe Byrne, deputy managing director at consultancy firm, Coyle Hamilton, in Dublin.
The PRSAs will replace some existing pensions vehicles, targeting those who are not covered by occupational plans.
The Irish Association of Pension Funds (IAPF) has expressed its concerns about the complexity of the new bill, warning that it might lead to a reduction in the quality of employer-sponsored schemes and an increase in the cost of pensions provision to individuals and employers.
Byrne comments: “DB schemes will become more expensive to run, and some people will consider switching to DC systems.”
The bill also contemplates the introduction of a pensions ombudsman that will be appointed by the Department for Social, Community and Family Affairs – a decision that has been fully supported by the industry. This appoinment will have power to investigate any complaint made by a beneficiary for financial loss made by a person managing an occupational pension plan or PRSA.

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