Pensions and PRSA
A frequently asked question that is put to the Peninsula 24 hour Advice Service concerns an employer’s obligations to their employees in respect of pensions and PRSAs. A lot of businesses do have an Occupational Pension Scheme in place at the moment. However, if you do not have such an Occupational Pension Scheme in place then what are your obligations? In this article we will look to identify the general rules that apply in respect of employees in Ireland. Certain industries, such as the construction industry, have different rules applicable to them and if an employer is unsure about the applicability of pensions to their business then please do not hesitate to contact the 24 Hour Advice service on 01 855 5050.
Do I need to provide a Pension Scheme?
As an employer, if you do not have such an Occupational Pension Scheme in place, then you are obliged to make a Personal Retirement Savings Account (PRSA) scheme available to your employee’s. A PRSA is a contract between an individual and an authorised PRSA provider such as investment business firms, insurance companies and credit institutions in the form of an investment account that can be used as a savings account so that the employee can contribute into it if they wish to do so towards their retirement age. There are two types of PRSA – a Standard PRSA and a non-Standard PRSA. The PRSA is also designed to be owned by an individual, regardless of their employment status, to be transferable from job to job, and to be available from a variety of providers. However, while you are obliged to provide reasonable access to an employee to a PRSA provider, you are not obliged as an employer to provide any PRSA advice.
A common misconception is that an employer is only obliged to provide access to their full-time permanent employees in respect of a PRSA scheme. This is not the case. As a general rule, all employees, be they part-time or fixed term, need to be given access to a PRSA scheme after 6 months service has been completed. While the obligation to provide access to a PRSA applies across the board, an employer is not obliged to provide access to a Contributory Occupational Pension Scheme where the part-time/fixed-term employee works less than 20% of the normal working hours of a comparable full-time/permanent employee. However, it is important that if you are not going to provide such access that the employer is not indirectly discriminating against a certain category of employee where, for example, only female or non-national employees will be excluded.
Providing Reasonable Access
Upon the implementation of the PRSA scheme, the employer is required to allow the employees reasonable access either in the work place or outside of work to engage with the PRSA provider. This may require the employer providing the employee with paid time off from work (e.g. a travelling sales rep who may not be able to get into the office). Furthermore, an employer must facilitate an employee’s requests for pension deductions to be carried out through the company payroll.
When Does a Scheme have to be provided?
An employer must make a PRSA savings account available to an employee after they have been in employment for six months. Some companies do have a policy in place whereby an employer must work for a company for a length of time, longer than 6 months, before an employee can access an Occupational Pension Scheme. This is fine to do; however, in the meantime the employer must be providing that employee with access to a PRSA in accordance with the six month service rule.
Occupational Pension Schemes
With regards to the Occupational Pension Scheme these will vary considerably from different pension providers so it very important for an employer to do their background research to make sure that the pension scheme that they go for is the most appropriate scheme for the company. Pension providers will generally provide a representative to come to your business to discuss the pension scheme and they will assist you in getting such a suitable scheme up and running within your business that is most suitable for you.
Is the Employer/Employee obliged to contribute a set amount to the pension scheme?
The amount that can be contributed by an employer/employee to a pension scheme can vary considerably and can often be increased and decreased to reflect an employee’s personal circumstances. An employer is not obliged to contribute to a PRSA scheme or an Occupational Pension Scheme. However, employers generally do so and this is often contingent on the employee reaching a certain length of service.
Conclusion
In summary, as an employer you do not have to give pension advice or even contribute to a pension scheme; you just have to provide a relevant person to give a pension service and advice to all your employees. By and large providing pensions to your employees is a worthwhile adventure as it benefits both the business and the employees as there may be tax savings initiatives for businesses and employees who are contributing to a pension scheme.
If you have any queries in respect of your pension obligations then please do not hesitate to seek advice through our 24 Hour Advice Service on 01 855 50 50 and one of our experienced advisors will be happy to assist.
