Providing PRSA Disclosure Certificate
The Pensions Act and regulations under it, require that PRSA providers to ensure that holders receive certain information from time to time.
The provider must furnished the PRSA holder with half yearly investment report of all funds in which the PRSA is invested. A statement of account must be provided, half yearly showing total contributions between employer and employee contributions, if applicable. Contributions since the last statement, broke down in the same way and transfer value, if there was to be a transfer.
A preliminary disclosure certificate is to be provided to the applicant before completion of the initial application form. There are different formats depending on whether the PRSA is a standard PRSA or a non-standard PRSA. The table in the preliminary certificate is generic.
The PRSA provider or intermediary must declare and sigh that a Preliminary Disclosure Certificate has been provided and this it has advised the person concerned as to the financial consequences of replacing an existing PRSA contract or retirement annuity contract with this PRSA contract by cancellation or reduction and of possible financial loss as a result of such a replacement.
Standard PRSA Disclosure Certificate I
The certificate shall contain the following information:-
Benefits; under this heading include a brief description of the benefits provided by the Standard PRSA and the manner in which those benefits may be taken by the contributor.
Investment Strategy; under this heading describe the Default Investment Strategy and any other investment strategy applicable to the Standard PRSA.
Tax; under this heading include information in relation to the tax issues relevant to the Standard PRSA including tax relief available on contributions and the extent of such tax reliefs, the tax treatment of income and gains earned under the PRSA contract and the tax treatment of benefits taken from the PRSA.
Risk Factors; Under this heading give a brief description of the factors which may have an adverse effect on performance or are otherwise material to the decision to invest, including investment risks, the restriction on taking benefits early and the consequences of not paying contributions.
Standard PRSA Disclosure Certificate II
A table of projected benefits is required. It is in a statutory format and includes in particular, in tabular form, statements of the amounts of contribution paid, retirement income payable from 65 if contributions start at specified ages. On the horizontal axis, ages 20, 30, 40, 50 and 60 are set out. On the vertical axis, the relevant amounts of contribution are set out.
The Table shows what the contributions of a projected amount per month, will yield at retirement age in terms of pension per month based on commencement of contributions at the specified ages.
The certificate shall contain the following information and table duly completed in the following form:-
- The benefits that will emerge from your Standard PRSA will depend, in particular, on the level of your contributions, how long you pay those contributions and the investment return achieved.
- the table below illustrates the retirement income for life payable monthly from age 65 projected to be obtained from contributions of different amounts starting from different ages. This retirement income has been adjusted for inflation so that the amounts are shown in terms of current prices.
Where, before offering to enter into a contract with a person, it is not practicable to give any of the values applicable to that person contained in the Preliminary Disclosure Certificate, then the Preliminary Disclosure Certificate shall contain values which would apply to a PRSA contract that would be expected to be typical of the contracts of that product issued by the provider.
The additional warning notice for a Preliminary Disclosure Certificate shall set our immediately before the words “TABLE OF BENEFITS”: –
“We do not have sufficient information to produce a certificate that reflects your specific circumstances. Consequently, the level of contributions, projected benefits and intermediary remuneration shown here may be misleading. If you accept the terms of this contract, we will subsequently send you a Statement of Reasonable Projection that will reflect your specific circumstances. You will then have 15 days in which you may cancel the contract if you wish.”
There are further mandatory warnings which must appear in bold and block capitals. The preliminary disclosure certificate for standard PRSAs must contain further warnings.
- “these illustrations assume an investment return before retirement of 6% per annum, and inflation of 3% per annum. The rates are for illustration purposes only and are not guaranteed. Actual investment growth will depend on the performance of the underlying investments and may be more or less than illustrated”.
- “It is important to make adequate provision for retirement”.
- “At the date of the certificate, the old-age contributory pension to a single person who has qualified to receive the maximum rate amounts to [ ] and amounts to [ ] percent of the latest yearly figures for gross average earnings as published by the Central Statistics Office for all industrial workers in all industries.”
- “The value of your assets and accordingly, the level of your benefits will depend on the value of the underlying investments of the PRSA and the income they earn. These values are not guaranteed and may fall from time to time as well as rise. The Standard PRSA is intended to provide benefits over the duration of your life from retirement and it should be viewed as a long-term investment.”
- If you propose to enter into this PRSA contract in complete or partial replacement of an existing PRSA contract or a retirement annuity contract, please take special care to satisfy yourself that this PRSA contract meets your needs. In particular, please make sure that you are aware of the financial consequences of replacing your existing PRSA contract or retirement annuity contract. If you are in doubt about this, please contact your PRSA provider.
Charges and Cooling Off
Information on charges is required. The information must be furnished on the operation of the charges and how they may change over time.
The certificate for a standard PRSA must contain wording as follows:
“the maximum per limited level of charges on a standard PRSA such as this is limited by law to 5% of each contribution and 1% per annum of the assets in the account.”
The certificate must contain a statement in relation to cooling-off. “This contract is not enforceable until a period of 30 days have elapsed from the date on which you are given a statement of reasonable projection and you may cancel this contract at any time during that period.”
Non-Standard PRSA Disclosure Certificate
There are broadly similar requirement for a non-standard PRSA. The warnings are broadly similar to those set out above. They are more detailed in some cases, reflecting the potential additional risks of a non-standard arrangement
A table of projected benefit must be provided by way of the preliminary disclosure certificate. It sets out on the vertical axis, the years of maturity showing respectively at years 1 to 5, 10, 15 and 20, it sets out on the horizontal axis:
- total amount of contributions paid to date;
- projected investment growth to date;
- projected PRSA contract value of no account is taken of applicable charges;
- projected contract value of account is taken of applicable charges.
Non-Standard PRSA Disclosure Certificate; Remuneration
The disclosure certificate must incorporate a table of illustrative intermediary and sales remuneration. The certificate must describe in detail the charges to be levied. The certificate shall contain a table duly completed relating to intermediary/sales remuneration in a specified form. It includes
- contributions payable in that year
- projected total intermediary and sales remuneration payable in that year
Where applicable ( as is usually the case) it is to state that the remuneration is paid for by us from the charges we make on your contract.
Statement of Reasonable Projection
A statement of reasonable projection is a statement predicting the likely future value of a pension from a defined contribution scheme or PRSA, which is based on assumptions relating to future contributions and investment returns, and the cost of buying an annuity when a member retires.
The statement of reasonable projection must be given by the provider to the PRS holder within seven days of commencement of the PRSA contract. It must be provided annually thereafter. The statement is to provide an indication of the level of benefit which can be reasonably expected at future dates in the future, most importantly at retirement. The format is similar to that in the preliminary disclosure certificate.
In addition to being provided annually, it must also be provided at any time within seven days of request. It must be provided within seven days of an increase in charges made by the PRSA provider.
The additional warning notice for a Statement of Reasonable Projection where there is a preliminary disclosure certificate is in a specified form with an additional note
“The level of contributions, projected benefits and intermediary remuneration may be substantially different from the Preliminary Disclosure Certificate you have previously received. If you are dissatisfied you have 15 days from being given this document to cancel the contract using the cancellation notice provided with this Statement of Reasonable Projection.”
Transfer from Scheme / RAC
Subject to conditions, certain individuals who are members of an occupational pension scheme may take a transfer from the scheme into a PRSA in place of a preserved benefit. A transfer inwards into a PRSA is not permitted unless the provider or another, acting on its behalf provides the individual with a certificate of benefit comparison and a statement of the reasons why the transfer is or is not in his interest.
The certificate of benefit comparison shows a comparison of the projected benefits which the scheme might provide if the preserved benefit is left in the scheme as compared with the projected benefits that might be provided in return for the transfer value.
The person providing the certificate and statement, must have professional indemnity insurance of at least €1 million per claim. The certificate of benefit comparison and the statement is not required in the case of
- transfers less than €10,000, transfers relating to less than two years service with the employer;
- transfer from a scheme in winding up, notified to the Pensions Board as being in winding up.