PRSAs a ‘total and complete disaster’

BUSINESS group ISME yesterday called the Government’s Personal Retirement Savings Accounts (PRSAs) a “total and complete disaster” that should be replaced.

It also called on the government to scrap proposals for mandatory pensions, which it said would wipe out small businesses by making it more expensive to hire workers.

ISME chief executive Mark Fielding said PRSAs, introduced two years ago to encourage those on low and medium incomes to take out personal pensions, were “a dangerous distraction” and had failed to provide easy access to pensions at a low cost.

He accused the Pensions Board - the agency charged with boosting pension coverage to 70% of the workforce - of abdicating responsibility by blaming employers for not doing enough to encourage their staff to sign up for a PRSA.

“This policy is flawed and baseless and is abdicating their responsibilities in an extremely important area within their remit.

“Instead of playing the blame game, the Pensions Board would be far better off looking at alternatives, instead of constantly promoting a product that has patently failed,” he said.

Figures released last week show just 4,500 new PRSAs were opened in the three months to June. This was around the same level as the previous quarter but was down from 9,000 in the three months to December.

Describing the product as “useless”, Mr Fielding said employers had a duty to their staff not to promote PRSA if they were unconvinced of their value.

Factors that turned workers away from PRSAs included the level of paperwork involved, high house prices and the success of Special Savings Incentive Accounts (SSIAs), which meant less disposable income to put into a retirement account. He also blamed consumer distrust of financial institutions and the charges they faced when taking out a PRSA for the lack of enthusiasm for the product.

Mr Fielding called for a replacement with a similar government top-up mechanism to the SSIA, which people would find easier to understand.

He said existing pension-related tax incentives had failed to catch the imagination of the public, even though the potential tax benefits involved were more generous than those of the SSIA.