Survey finds poor awareness of PRSAs

Almost half of business managers claim to be unaware of the impact of new pensions legislation on their businesses, according to a survey by accountancy firm Deloitte & Touche.

Mr Brian McDonald, tax partner in Deloitte & Touche, said the survey showed "a high level of complacency" among Irish business managers.

Some 47 per cent of the 303 business managers surveyed said they were not aware of how new rules under the Pensions Amendment Act 2002 would affect their business. Employers must provide those employees with more than six months' service access to at least one standard personal retirement savings account (PRSA) by September 15th, 2003.

The sector most aware of the legislation is property and construction (86 per cent), which Deloitte & Touche attributes to the large number of small businesses and self-employed people in the sector. Almost two-thirds of the companies surveyed already provide contributory pension schemes.

The survey confirmed that defined-benefit schemes, where employees are guaranteed a pension based on a proportion of their final salary, occur in larger companies in business for more than 20 years, or multinationals.

Defined contribution schemes, which typically give employees a lower level of benefit on retirement, are more prevalent in smaller to medium-sized businesses with a turnover between €5 million and €10 million and between 11 and 100 employees.

Employers are not required to contribute to PRSAs and employees will, in many cases, bear the cost of fund management and other charges.

However, unlike traditional pension schemes, PRSA holders do not have to buy an annuity but can invest the proceeds of their pension contributions in an Approved Retirement Fund.

Mr McDonald said employers operating a pension scheme might come under pressure from existing or future members to introduce a PRSA. "This would give members of the scheme wider choice over how they might receive their benefits," he said.