Take-up of PRSAs continues to slow
Only 4,500 new PRSAs were taken out in the three months to March, bringing the total to almost 51,000. This compared unfavourably with the 9,000 opened in the three months to December and almost 8,000 opened in the first three months of 2004.
The performance came on the back of disappointing sales in the crucial October to December period, which is considered critical in the industry as it coincides with the end of the tax year, which provides an additional motivation for potential customers to sign up. Awareness of the tax breaks associated with pensions is considered to peak around this period.
Only 27,000 new PRSAs were sold last year, but the latest figures suggest the Pensions Board will struggle to match this in 2005.
Investment firm Friends First said recently that the PRSA initiative was “not working” and that the Government needed to do much more to reach its targets. The Government aims to increase the level of pensions coverage from just over 50% of the workforce to 70%.
But the total value of assets held in PRSAs continues to grow steadily. PRSA balances grew from €178 million at the end of December to 224m at the end of March, an increase of 26%. More than 71,000 employers signed up with a dedicated PRSA provider, in accordance with pensions legislation that requires employers to make it easy for employees to take out a personal pension.
But only 22,000 employees, around 40% of the total signed up to date, have taken out a PRSA through their employer.
Many banks and life assurance companies have been unenthusiastic about the PRSA initiative because they consider the business low-margin, unattractive and time-consuming. The perception that PRSAs are focused on the lower paid means the amounts flowing through PRSA accounts are lower than is the case with other pension products.
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