Cost varies for non- standard PRSAs

Charges on standard PRSAs are capped at 5 per cent of contributions and a 1 per cent annual management charge, but charges on non-standard PRSAs vary greatly.

These higher charges are meant reflect a greater choice of investment funds, but in some cases also allow incentives for brokers to sell them.

Most companies offering non-standard PRSAs - currently Bank of Ireland, Canada Life, Eagle Star and Irish Life - have gone down the road of increasing the annual fund management charge from 1 per cent to 1.25 per cent or more.

An extra quarter of a point on an annual management charge might not sound like much, but it could reduce a person's pension fund by almost €11,000, based on a monthly contribution of €300 over 30 years, and assuming growth of 6 per cent on the fund.

Hibernian and Friends First are keeping annual fund charges at 1 per cent but offering a range of charges on contributions.

Hibernian, which is launching its PRSAs today, is offering three non-standard products; PRSA Choice₀, PRSA Choice₅ and PRSA Choice₈. A spokesman for Hibernian said there was no difference between each of these non-standard PRSAs apart from the charges and that they were designed to facilitate the business models of the brokers selling them.

It is possible to pay no contribution charges under Choice₀, if you pay more than €5,400 a year into your PRSA. People contributing €2,400-€5,400 a year pay 2.5 per cent in contribution charges.

But under PRSA Choice₅ and PRSA Choice ₈, charges on contributions can be as high as 10 and 13 per cent respectively. These products are expected to be more attractive to brokers working on high commissions rather than fixed fees.

Canada Life is offering a traditional "front-loaded" pension, where 50 per cent of year one's contributions are taken to pay brokers and agents' commission. After that, the charge on contributions is 3 per cent, which could represent good value for consumers who continue with their PRSA until retirement.

At Friends First, the scale of charges benefits people making high-value contributions. Anyone contributing more than €300 a month or an annual single premium in excess of €3,000 will be charged 5 per cent, the same as on standard PRSAs. Customers placing more than €1,200 a month or an annual single premium of more than €12,000 into their pension see 4 per cent of their contributions taken out of their fund.

But people contributing less than €300 a month see 9 per cent of their fund disappear, while people paying less than €150 a month pay a penal 15 per cent in contributions.

By law, providers are not allowed impose a minimum contribution greater than just €300 a year, but with such high charges on low contributions, Friends First is making it clear that poorly paid workers trying to put aside what they can, when they can, would be better off selecting a standard PRSA over a non-standard PRSA product.

On both PRSAs, Friends First pays a bonus of 0.2 per cent of the fund value for funds greater than €20,000, starting from year 11. Once a fund exceeds €100,000, the portion over €100,000 attracts a bonus of 0.4 per cent.

Irish Life also rewards PRSA holders who build up substantial funds, offering discounts of 0.05 per cent once funds exceed €100,000. Single premium customers receive a discount of 0.35 of a percentage point off annual fund charges under its non-standard PRSA.

Under pensions legislation, PRSA holders are free to stop and start contributions at any time.

Eagle Star's Advice (Rebate) PRSA, meanwhile, rewards people who pay into their pension every year and retire on the date originally selected. This PRSA has a charge of 1.75 per cent, all of which is rebated to the customer if the terms of the agreement are not broken. Its Advice PRSA charges 1.5 per cent. In effect, people who opt for Advice (Rebate) but later break the terms of the agreement will in effect pay a penalty of 0.25 of a percentage point for every year.

Providers may offer more competitive terms for group PRSAs in an attempt to sign up as many employers as possible.

Consumers, however, are free to switch between providers at any time during the life of their PRSA without attracting any penalty.