Personal pensions: PRSAs and RACs
A personal pension is a retirement savings plan you set up yourself, independent of your employer. In Ireland the two main types are the Personal Retirement Savings Account (PRSA) and the Retirement Annuity Contract (RAC), sometimes called a personal pension plan. They are the natural choice for the self-employed, for employees whose employer offers no occupational scheme, and for anyone who wants to top up their workplace pension with additional voluntary contributions (AVCs).
PRSA vs RAC: what is the difference?
A PRSA is a flexible, portable contract available from banks, insurers and investment firms. Anyone aged 16 to 75 can open one, contributions are flexible (you can start and stop at any time), and the provider must keep charges within Central Bank limits (a maximum 5% on contributions for standard PRSAs, plus an annual management fee of up to 1%). Employers with 5 or more staff who do not offer an occupational pension must provide access to a PRSA. An RAC is an older-style contract aimed mainly at the self-employed and those with non-pensionable earnings; it can offer a wider investment choice but is less flexible than a PRSA, and RAC contributions must be paid regularly (or at least annually).
Contribution limits and tax relief
Contributions to PRSAs and RACs attract income tax relief at your marginal rate (20% or 40%), within age-related limits: 15% of earnings under 30, 20% in your 30s, 25% in your 40s, 30% at 50-54, 35% at 55-59, and 40% from age 60, all subject to the €115,000 earnings cap. For a standard PRSA, relief at source is claimed automatically by the provider (20%); higher-rate taxpayers claim the balance through myAccount. At retirement, you can take 25% of the fund tax-free (up to €200,000), with the rest used to buy an Approved Retirement Fund (ARF) or an annuity.
The new auto-enrolment alternative
If you are an employee without an occupational pension, check whether you are being enrolled in the new My Future Fund auto-enrolment scheme (rollout from 30 September 2025, payroll deductions from January 2026). Contributions start at 1.5% of salary from you, 1.5% from your employer and a 0.5% State top-up, rising over time. Auto-enrolment is a workplace scheme, not a personal pension, but it does not stop you opening a PRSA as well — many people use a PRSA for additional voluntary contributions on top of auto-enrolment.
Action steps
- Compare PRSA providers on charges and investment options — the standard PRSA charge cap (5% on contributions, 1% annual) protects you; check any 'non-standard' PRSA's charges carefully.
- Set up a standing order so contributions are regular, and increase them when your income rises.
- If you are self-employed, pay contributions by 31 October to count against the previous tax year.
- Review your fund's investment strategy at least once a year, and lower risk as you approach retirement.
- Keep your provider's details up to date and nominate a beneficiary — on death before retirement, your fund is paid to your estate or nominated beneficiary.
Choosing where to invest
Irish PRSAs and RACs offer a range of investment funds: cash, bonds, Irish and international equities, property funds and 'lifestyle' (default) funds that automatically reduce risk as you approach retirement. Most people are best served by a low-cost diversified equity fund in their 20s-40s, gradually moving to a balanced or cautious fund from about age 50. Charges matter more than short-term performance: a 1% annual fee difference can reduce your final fund by 20-25% over 30 years, so compare the total expense ratio (TER) as well as the marketing. Under the standard PRSA rules, contribution charges are capped at 5% and annual management charges at 1%, so a 'standard PRSA' is rarely a bad deal.
What happens to your pension if you die
If you die before retirement, your PRSA or RAC fund is paid out in full to your estate or nominated beneficiary. Since 2017, the beneficiary can inherit the fund as a vested PRSA or ARF (subject to tax: the fund is treated as an inheritance for Capital Acquisitions Tax, but the beneficiary can also draw an income), or take it as a lump sum (taxed at 25% up to certain limits... actually, a lump sum paid on death before retirement is taxed as income of the beneficiary in most cases — check current Revenue rules). Nominating a beneficiary in writing with your provider avoids delays and probate complications. If you die after retirement, any remaining ARF value passes to your beneficiaries, while an annuity with no guaranteed period dies with you — one of the key trade-offs when choosing between the two.