Non-standard PRSA could deprive investors
Due to go on sale shortly the PRSAs will be offered in standard and non standard form.
Ark Life finance director, Brian Woods, said yesterday Ark looks like it will be unique in offering the basic product only to investors.
By allowing other PRSAs (Non standard) on the market Mr Woods said investors could end up paying "a spurious" €20,000 in extra commission if they are talked into taking out the non standard PRSA.
In his view he said the standard PRSA ought to ensure adequate return to those staking out a pension. That is why they were put in place in the first instance.
Charges on the standard PRSA under the law are capped on the basis of a 5% commission and 1% annual management charge.
Alternative pensions under the PRSAs will carry just two charge categories but are not capped.
"Charges can start higher and be increased anytime", said Mr Woods.
He accused the insurance industry of lobbying hard to get the government to allow the non standard product purely for reasons of "self interest."
When the first six companies are announced Monday he expects the number of non standard products will be substantially higher than the standard.
The aim of the PRSAs was to increase pension cover from 50% of the working population to 70%, but Mr Woods thinks the current structure will mitigate against that objective being achieved.
By allowing the industry to offer non standard product Mr Woods fears The Pensions Board has given a hostage to fortune.
Mr Woods accused the insurance industry of lobbying for the open ended charge product on the grounds of lost commission.
Serious commissions will be lost to the industry, but in allowing the non standard PRSA, not capped, Mr Woods believes The Pensions Board has allowed its original intention to be seriously diluted.
Mr Woods believes there will be about 50 non-standard products against five or six standard PRSAs on the market next Monday.
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