BENEFITS: People leaving employment after 15 years service will not be able to transfer their pension benefits into the planned Personal Retirement Savings Accounts following a late amendment to pension legislation currently at committee stage in the Dáil.
In addition, industry experts say the current wording of the Pensions (Amendment) Bill 2001 suggests that employees remaining in the same employment who have built up additional pensions funds through voluntary contributions (AVCs) will not be able to transfer these funds into PRSAs.
The Bill is expected to be enacted before Easter. While it will bring improvements for occupational scheme members, it will not remove their so-called "annuity trap" disadvantage compared with self-employed people.
Among the late amendments is a restriction of the right to transfer pensions benefits on leaving employment from occupational pension schemes into PRSAs to employees with less than 15 years service. As low cost, easy-access, portable and flexible long-term personal accounts in which people can save for retirement, PRSAs will give the holders ownership of their funds and they will not have to buy an annuity on retirement to provide their pensions.
But the pensions funds of employees in occupational schemes for 15 or more years must still be used on retirement to buy an annuity to provide their pension income. The requirement to buy an annuity means the retiree has no control over the funds built up and that annuity income largely dies with the retiree leaving no assets to be passed to dependants.
"The Bill contains a number of very positive changes for members of occupational pension schemes," according to Mr Tony Scanlon, technical director at Becketts Employee Benefits Consultants. The row-back on tranfers to PRSA is aimed at avoiding large scale transfers out of occupational schemes, he explained. "There was some concern that the new PRSAs could be used as an alternative pensions product for people already covered by existing pension plans, rather than generating new pension coverage which was the original purpose," he said.
Another late amendment will make it easier for existing life assurance companies, investment managers and credit institutions to offer the new PRSAs - they will no longer have to set up a separate company for these products. It will make it more difficult for non-traditional providers to get into the market, according to Mr Scanlon.
An amendment reducing the time allowed for the approval of PRSA products to three months from six months should mean some PRSAs will be on the market by about September, industry sources suggest.
