Page 1

PRSA Customer Brochure


Contents 1. Introduction

1

2. PRSAs

2

3. Tax advantages

4

4. How is my PRSA invested?

6

5. What happens at retirement?

11

6. Information on your contract

15

7. Why choose us?

16

This brochure is designed as a quick reference to all of the main features of the policy. For full details of any individual cover or any other aspect of the policy, you should consult the Policy Document, which is definitive in all matters of interpretation and entitlement to benefit. In the event of any conflict between this brochure and the Policy Document, the provisions of the latter will prevail.

1. Tax Notice Your PRSA contract will be operated in compliance with the legislation as it pertains to PRSAs in particular to Part X of the 1990 Pensions Act and Chapter 2A of Part 30 of the Taxes Consolidation Act, 1997. (a) Entitlement to income tax relief on contributions is not automatically guaranteed. (b) Otherwise than as provided in Part 30, Chapter 2A Taxes Consolidation Act 1997 and Section 109 Pensions Act 1990 as amended, there is no provision for a payment of PRSA assets to a contributor. Details regarding tax relief and the form in which PRSA benefits can be taken are included in this brochure.


Introduction

1

Introduction Throughout your working life, it is hard to get even a moment of freedom. Life often entails spending time doing things out of duty to your family or your work. There is relatively little time left for you and the things you would really like to do. It can be difficult to look into the future to see how your life will develop. But there are some things that you can be relatively sure about. It is very likely that you will live to retirement age, will be in reasonable physical shape and will have another 25 to 30 years to live.

Will I manage on the State Pension? Retirement will give you the time to follow your plans, but your freedom will be restricted by the amount of money that you have saved. The following is an example of the current pension that is provided by the State and that many people are relying on as their sole source of income after retirement. State Pension (contributory) per year

â‚Ź12,017

Average Industrial Wage per year

â‚Ź35,749

Drop in income at retirement

66%

In this example the State Pension (contributory) is only 34% of the average industrial wage.

You can easily work out your own decrease in income. If, for example, you earn twice the average industrial wage, the drop in your income would be 83%. If you earned three times the average industrial wage, the State Pension would give you a replacement percentage of only 11%, leaving you with a large hole in your finances. If you want to be free to do what you want later in life, you need to make the most of the cash and investments you have now. A bit of planning is all it takes. The Government will give you significant help in making your retirement as comfortable as possible. But you need to plan now to take advantage of this.

1


PRSAs

2

PRSAs What is a PRSA? Personal Retirement Saving Accounts (PRSAs) are flexible, portable, low-cost, transparent pensions. Anyone can take out a PRSA regardless of employment status. You and your employer, if any, can gain tax relief on contributions to it, you can take it with you if you change your job or employment status, and you can stop and start making contributions at any time. See page 4 for further information (Tax Advantages). A Zurich Life PRSA will help you to obtain freedom in retirement and gain tax relief on the contributions. And the freedom does not stop at retirement. With the proceeds of your PRSA, you can invest your retirement fund in an Approved Retirement Fund (ARF). These funds (described later in greater detail) will give you even more freedom in how you use your retirement savings. There are two types of PRSAs, Standard and Non-standard. This brochure refers to both. One major feature of a Standard PRSA is that the charges are limited by legislation. You can find details of the charges applicable to you from your financial advisor or PRSA provider. The fund choice is somewhat wider for Non-standard PRSAs and the full choice of funds available for Standard and Non-standard PRSAs is shown later in the brochure.

How much should I invest in a PRSA? You need to decide how much money you will require in retirement to meet your aspirations. You may well find that the euro put aside for tomorrow will be much better used than the one spent today. For example, would your life change that much if you were paid 20% less? If this decrease were the result of investing 20% of your salary in a PRSA, although the effect on your current standard of living might be marginal, the effect on your future standard of living would be significant. For example, 20% of a €36,000 salary invested in a PRSA by a 30-yearold could mean the difference between retiring at age 65 on €230 (State Pension, contributory) and €478* a week - a huge difference in money and a big difference in the ability to make the most of your new freedom. €230 per week

Which pension would you prefer?

€478* per week

* The projected pension is shown in terms of current prices. See assumptions opposite.

2

P R

Standard

P R Advice

SA SA


PRSAs

When should I start a PRSA? The longer you save, the larger your retirement fund will be. The earlier you start, the easier it is to fund for your target pension. Clearly, it makes a lot of sense to pay contributions for as long as possible. The following table shows the difference that delay can have.

Pension produced by 20% contribution* Age when starting PRSA

Pension as a percentage of salary

30

36%

40

24%

50

13%

60

4%

* Assumptions: Retirement age of 65; current salary of ₏36,000; salary and contribution escalation of 3% p.a.; investment return of 6%. The annuity rate used assumes a spouse’s pension of 100%, post-retirement investment return of 4%, a 5-year guarantee period and 2% escalation p.a. The above figures assume the continuation of current expense charges, a 4.25% contribution charge and a 1% Annual Management Charge.

Warning: These figures are estimates only. They are not a reliable guide to the future performance of this investment. The value of your investment may go down as well as up. Benefits may be affected by changes in currency exchange rates.

Can I transfer my existing pension into a PRSA? You have the option of transferring the assets of your PRSA to another PRSA or pension scheme, subject to such conditions as may be prescribed by the Revenue and the Pensions Board. Providing that the parties involved agree and the relevant legislation is complied with, your PRSA may receive transfers of assets from another PRSA or pension arrangement. There are various limitations on transferring assets from an occupational scheme into a PRSA and you should discuss the options with your employer/financial advisor.

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Tax advantages

3

Tax advantages The great thing about saving for retirement is that the taxman gives you a really good deal. As the table below shows the actual cost of PRSA contributions is significantly lower when tax relief is taken into account. Please note that there are limits relating to the amount of tax relief that is available. These are explained below.

Monthly PRSA Contribution

€200

Tax Relief

=

Cost to You

41% Income Tax

€118

€200 20% Income Tax

€160

Key tax savings of PRSAs 1. Y  our contributions into your PRSA are free of income tax up to certain limits. The table below sets out the limits. 2. T he investment growth that your retirement fund achieves is also free of tax. 3. A  lthough you do pay tax on your retirement income, you will get a tax-free lump sum of up to 25% of your accumulated fund (except for PRSA AVCs).** Age at your birthday during the year

Limits

Up to 29

15%† of net relevant earnings*

30 to 39

20%† of net relevant earnings*

40 to 49

25%† of net relevant earnings*

50 to 54

30% of net relevant earnings*

55 to 59

35% of net relevant earnings*

60 plus

40% of net relevant earnings*

* Subject to maximum earnings of €115,000 p.a. under current legislation in 2011. † 3  0% limit applies to professional sportspersons who are less than 55, (such as athletes, jockeys, etc.). ** If the monies are coming from an AVC plan, the amount of tax-free cash available will depend on the benefits from your main pension scheme.

4


Tax advantages

Key tax savings of PRSAs explained... Any contributions that you make to a PRSA are included in the above limits. If applicable, any contributions that your employer makes to your PRSA are also included within the limits above. Please note that any transfers of assets from other pension arrangements do not affect your contribution limits or your tax liability. If you are a member of your employer’s pension scheme and wish to contribute to a PRSA then these contributions are regarded as Additional Voluntary Contributions (AVCs). As such you can claim tax relief on these contributions based on your earnings from that employment. If you use your PRSA as a way of making AVCs, the trustees or Zurich Life will be obliged to ensure that the benefits payable are not likely to exceed the maximum benefits permitted by the Revenue Commissioners before we accept any AVCs from you. Also, your tax-free lump sum will be based on the benefits you are taking from your main pension scheme. If contributions are deducted from your salary by your employer, relief against income tax will be given immediately; otherwise, you will need to apply to your Inspector of Taxes. A person not in the workforce would not be able to claim tax relief. Contributions paid while out of the workforce, however, may be carried forward and claimed against future earnings on return to paid employment, subject to the annual limits.

What happens to my PRSA if I die before retirement? Your fund will be paid free of income tax to your estate if you die before drawing your retirement benefits; inheritance tax, however, may still apply.

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How is my PRSA invested?

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How is my PRSA invested? With a Zurich Life PRSA you choose the investment strategy that suits your attitude to risk and return. If you are happy to make your own investment decisions and want to choose from a range of funds investing in a variety of assets, geographical areas and sectors then the Matrix range of funds could be for you. If however, you are not comfortable making investment decisions you can select our Default Investment Strategy which automatically changes your pension fund to a lower-risk portfolio as you near retirement.

Default Investment Strategy (DIS) The Default Investment Strategy (DIS) is an automatic mechanism that gradually transforms your pension fund from a higher-risk portfolio to a lower-risk portfolio as you approach retirement. This protects you from the impact of a stock market crash prior to retirement. It will be chosen for you if you make no choice as to your investment preference. A DIS is designed to fulfil the reasonable expectations of a typical investor for the purposes of saving for retirement. The DIS will operate in different ways depending on whether you want to fund for an Annuity or an ARF (see pages 11 and 12). The DIS invests contributions in a PRSA fund with a reward/risk profile that is suitable to the number of years remaining to your selected retirement date. With a longer period to retirement, we believe that you should invest in funds with the potential for higher returns, even though these funds are more inherently risky. As you approach retirement, however, we recommend that your PRSA moves into a more stable investment to protect the investment performance achieved to date.

6


How is my PRSA invested?

If you intend to purchase an annuity with your retirement proceeds, your contributions will be directed as shown in the table below.

umber of years N to retirement

Contributions to

Type of fund

Dynamic Fund

Aggressively Managed

t least 15, but A less than 25

Performance Fund

Aggressively Managed

At least 5, but l ess than 15

Balanced Fund

Managed

Active Fixed Income Fund

Fixed Interest/Bonds

At least 25

Less than 5

Five years before your selected retirement date, monies invested in the Dynamic, Performance, and Balanced funds will be gradually switched into the Active Fixed Income fund – a proportion of the value of each fund will be switched each month into the Active Fixed Income fund. Eventually, your PRSA will be invested 100% in the Active Fixed Income fund. Because of the investments held by the Active Fixed Income fund, its price is expected to fall and rise, broadly in line with changes in the cost of annuities as interest rates fluctuate.

Using your PRSA to fund for an Annuity

Fund Value â‚Ź

Active Fixed Income Fund Balanced Fund Performance Fund Dynamic Fund

35

25

15 Years to Retirement Age

7

5

0


How is my PRSA invested?

If you intend to invest your retirement proceeds in an ARF or keep your funds in your PRSA, your contributions will be directed as shown in the table below. umber of years N to retirement At least 25 t least 15, but A less than 25 Less than 15

Contributions to

Type of fund

Dynamic Fund

Aggressively Managed

Performance Fund

Aggressively Managed

Balanced Fund

Managed

Fund Value â‚Ź

Five years before your selected retirement date, monies invested in the Dynamic and Performance funds will be gradually switched into the Balanced fund – a proportion of the value of each fund will be switched each month into the Balanced fund. Eventually, your PRSA will be invested 100% in the Balanced fund.

35

Balanced Fund Performance Fund Dynamic Fund

25

15 Years to Retirement Age

8

5

0


How is my PRSA invested?

Matrix Funds If you wish to choose the funds for your Zurich Life PRSA, simply combine the Matrix funds that best suit:

Matrix

1. the control you wish to have over your investment; and 2. your attitude to return and risk. To help make your fund choice, ask yourself the following questions:

1. What control do I want when investing? Control Fund Choice Available for PRSA Contracts Total control

P R

Personal Portfolio

Some control 5★5 Asia Pacific 5★5 Europe I want to choose particular sectors/regions to invest in. 5★5 Americas

Advice

P R Advice

P R Advice

P R Advice

Irish Equity

P R

Eurozone Equity

P R

Advice

Advice

TopTech 100

P R

Dividend Growth

P R

Advice

Advice

Active Fixed Income

P R

Long Bond

P R

Total investment manager control

5★5 Global

P R

Advice

Advice

Advice

I Dynamic want experts to make the choice of investment decisions for me. Performance

P R

Balanced

P R

Cautiously Managed

P R

International Equity

P R

Advice

P R Advice

Advice

Advice

Advice

SuperCAPP

P R

Secure

P R

Advice

Advice

SA P R

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

SA

SA P R

Standard

SA

SA

SA P R

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

SA

SA P R

Standard

SA

SA

You will find more details on the Matrix range of funds at www.zurichlife.ie

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How is my PRSA invested?

Remember that return and risk are related; normally, the higher the potential return, the higher the potential risk. The funds that are common to your risk/return and control choices can be selected for your PRSA.

2. What return do I expect, and what risk am I prepared to take for that return? Return/Risk Fund Choice Available for PRSA Contracts Low return/risk

Secure

P R

Moderate return/risk

SuperCAPP

P R

Cautiously Managed

P R

Active Fixed Income

P R

Medium return/risk

Balanced

P R

Long Bond

P R

Advice

Advice

Advice

Advice

Advice

Advice

Eurozone Equity

High return/risk

P R Advice

International Equity

P R

Dividend Growth

P R

Advice

Advice

Dynamic

P R

Performance

P R

Advice

Advice

5★5 Global

Higher return/risk

P R Advice

5★5 Europe

P R

5★5 Asia Pacific

P R

5★5 Americas

P R

Irish Equity

P R

TopTech 100

P R

Risk at your discretion

Personal Portfolio

P R

Advice

Advice

Advice

Advice

Advice

Advice

P R

Standard

SA

SA

SA P R

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

P R

SA

Standard

SA

SA

SA SA

SA

If you would like more information on any Matrix fund available under this contract, please talk to your financial advisor or call our Customer Services on (01) 799 2711, or visit our website www.zurichlife.ie

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What happens at retirement?

5

What happens at retirement? Approved Retirement Funds (ARFs) In the past, you had no control over the fund you had built up for retirement - after taking tax-free cash you had to buy an annuity. Now, there is another option - Approved Retirement Funds, or ARFs, as they are more commonly known. Put in simple terms, ARFs give you more freedom to choose how best to use your retirement fund. Before you can invest in an ARF or take a taxable lump sum, you must have a guaranteed pension income of at least 1.5 times the annual State Pension (Contributory) or have invested at least 10 times the annual State Pension (Contributory) in an AMRF (see below) and/or an annuity. As at February 2011, these figures are about â‚Ź18,000 p.a. and â‚Ź119,800, respectively. Can I invest my PRSA fund in an ARF? Yes. If you are contributing to a PRSA, you can invest the fund built-up by your contributions in an ARF when you retire. While in an ARF, your investment growth is not taxed. You can make regular withdrawals from your ARF (which are subject to tax) to provide you with a pension income, and you are free to withdraw your money at any time. With an ARF, you can decide when to access your fund, and you retain control over how your pension fund is invested. ARFs and the family silver If you choose to buy a basic annuity when you retire, your pension will stop when you die. The funds in your ARF are available to your family after your death. This can be appealing if you want your spouse or children to benefit from the PRSA contributions you have made throughout your life.

Approved Minimum Retirement Funds (AMRFs) An Approved Minimum Retirement Fund is similar to an ARF. However you cannot access the capital of this fund before age 75, but you can access the amount of the fund growth.

Continued PRSA When you come to retirement you may withdraw your tax-free cash (see page 4) and leave the balance of your account in your PRSA. You may not continue your PRSA beyond age 75. To withdraw an income from a PRSA you must have either a guaranteed pension income of at least 1.5 times the annual State Pension (Contributory), an AMRF of 10 times the annual State Pension (Contributory) or your PRSA fund must be at least 10 times the annual State Pension (Contributory). If a PRSA is used to make AVCs then the continued PRSA option does not apply.

11


What happens at retirement?

Annuities - an income for life You may want the security of a guaranteed level of income in retirement with respect to all your funds. This is not always possible with an ARF. For example, if you take too large an income from your ARF early on, you could exhaust your fund. If you do not want to take this risk, you should consider purchasing an annuity. Annuities will provide you with a guaranteed income for life. You can also provide an annuity benefit for your spouse after your death.

Your retirement options Decision Tree Your Retirement Fund

Take up to 25% of fund as tax-free cash*

Balance of Fund or If you have a guaranteed income of 1.5 times the State Pension (Contributory) p.a.

Buy an Annuity

i.e. a guaranteed income for your life

Withdraw capital

If your guaranteed income is less than 1.5 times the State Pension (Contributory) p.a.

Invest 10 times the annual State Pension (Contributory) in an Approved Minimum Retirement Fund

Invest in an Approved Retirement Fund or continued PRSA

Buy an Annuity i.e. a guaranteed income for your life

Invest the surplus in an Approved Retirement Fund or continued PRSA

Withdraw an income

Any withdrawals are subject to Income Tax and the Universal Social Charge. * If monies are coming from an AVC plan, the amount of tax-free cash available will depend on the benefits from your main pension scheme.

12


What happens at retirement?

You also have the option to use a mix of ARF/AMRF investment and an annuity to provide you with an income in retirement. Please note that you can continue to make contributions to your PRSA after you have taken retirement benefits, although you will not be entitled to any further tax-free cash. Maximum pension fund and tax-free lump sum There is a limit to the size of pension funds and on the size of the tax-free lump sum that can be taken at retirement. The maximum value of total pension funds is €2.3 million in 2011. If your pension funds exceed this at retirement, you will have to pay tax at 41% on the excess. Subsequent drawdowns will also be subject to Income Tax and the Universal Social Charge. The maximum amount of tax-free cash you can take is €200,000. Lump sums of between €200,000 and €575,000 may also be taken as cash when you retire. However the standard rate of tax (currently 20%) applies to any excess over €200,000.

Taxation Are ARFs, continued PRSAs and annuities subject to tax? Withdrawals from an ARF or continued PRSA and income from an annuity are subject to PAYE at source and the Universal Social Charge. However, the normal tax credit and income exception limits apply. An annual tax is payable on the value of an ARF, called an 'imputed distribution'. This tax applies where the ARF holder is 60 years of age or older for the whole of the tax year, and amounts to Income Tax plus the Universal Social Charge on a deemed withdrawal of 5% of the fund value, every December 31st. Any actual income or encashment taken from the ARF or AMRF during the year may be deducted from the deemed withdrawal for the purpose of calculating tax. If the actual withdrawal equals or exceeds the deemed withdrawal, then no further tax is payable in relation to that particular year. The ‘deemed withdrawal’ rule does not currently apply to continued PRSAs.

13


What happens at retirement?

Tax implications of passing on an ARF/AMRF or Continued PRSA On death, any funds held in an ARF or continued PRSA in your name are payable to your estate. You are free to bequeath them to whomever you wish. The tax treatment of the fund depends on who inherits the funds. If the ARF or continued PRSA is to be transferred to an ARF or continued PRSA in your spouse’s name, or in cash to children under age 21, there is no income tax to be paid. If monies are transferred to a spouse in cash, income tax is payable as if the monies had been withdrawn by the deceased ARF or continued PRSA holder. If monies are transferred to children aged 21 and over, tax is payable at the standard rate (currently 20%). Tax is due at the deceased’s marginal rate if the assets are transferred to any other persons. Capital Acquisitions Tax may also be payable, unless the monies are paid to a spouse or to children aged 21 and over. Inheritance planning Although the taxation rules on passing on an ARF are somewhat complex, they do open up a great opportunity for tax-efficient inheritance planning. This will be an area where good advice will greatly assist you. For a copy of the Zurich Life ARF brochure, ask your financial advisor, call us on 1850 202 102 or visit our website www.zurichlife.ie

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Information on your contract

6

Information on your contract You will be updated regularly on your PRSA contract.

Statement of account Every six months, you will receive a statement that will inform you of the contributions that you have made over the previous six months. You will also be told the value of your PRSA assets at the end of the period. Please note that these statements may be required by your Inspector of Taxes.

Investment report Every six months, you will receive an investment report outlining information on the investment performance of your funds.

Statement of reasonable projection At the beginning of the contract and in every calendar year thereafter, you will receive a statement of reasonable projection that will enable you to estimate your fund at retirement. This projection is not a guarantee of the funds that will be available and may vary substantially depending on your future contributions and investment returns.

15


Why choose us?

7

Why choose us? Excellent investment performance Zurich Life PRSAs offer you the choice of our tailored Default Investment Strategy and the Matrix range of funds. We gained recognition for our investment performance at the most recent MoneyMate and Investor Magazine Awards when the company was named 'Best Investment Fund Manager', 'Best Balanced Managed Pension Fund' and 'Best Balanced Managed Investment Fund'.

Best Investment Fund Manager Best Balanced Managed Pension Fund Best Balanced Managed Investment Fund Service excellence We are one of Ireland’s most successful life insurance companies, offering a full range of pension, investment and protection products. The company has won many industry service awards and was named 'Best Insurance Provider' at the most recent MoneyMate and Investor Magazine Awards.

Web access We are a leading provider of information through the web. With access to the Client Centre at www.zurichlife.ie, you will be able to find out the value of your PRSA assets, the investment return of your chosen funds and information on your contributions online.

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Why choose us?

Product design We have developed an extensive product range that means you can be provided with the PRSA product that is right for you.

Warning: The value of investments may go down as well as up. The income you get from investments may go down as well as up. Investments may be affected by changes in currency exchange rates.

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About us

Zurich Life Assurance plc is a member of Zurich Financial Services group a leading multi-line insurance provider with a global network of subsidiaries and offices in Europe, North America, Latin America, AsiaPacific and the Middle East as well as other markets. Founded in 1872, Zurich Financial Services group is headquartered in Zurich, Switzerland. It employs approximately 60,000 people serving customers in more than 170 countries.

As one of Ireland's most successful life insurance companies, we offer a full range of Zurich Life Pension, Investment and Protection products. Our investment team, based in Blackrock, Co. Dublin, is responsible for funds under management of approximately €10.9 billion, of which pension assets amount to €6.2 billion (as at 31st December 2010).

We are committed to the provision of excellent customer service. We have won a number of industry service awards, including the Professional Insurance Brokers Association ‘Broker Service Award of Excellence’ 2010, for the eighth year in a row, and we are fourteen times winner of the Irish Brokers Association ‘Service Excellence Award’. We are a market leader in providing policyholder information online through our innovative website, www.zurichlife.ie

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Print Ref: PB90 0311

Zurich Life Assurance plc Zurich House, Frascati Road, Blackrock, Co. Dublin, Ireland. Telephone: 01 283 1301 Fax: 01 283 1578 Website: www.zurichlife.ie Zurich Life Assurance plc is regulated by the Central Bank of Ireland. Intended for distribution within the Republic of Ireland. The information contained herein is based on Zurich Life’s understanding of current Revenue practice as at March 2011 and may change in the future.

PRSA Customer Brochure  

A PRSA is a Personal Retirement Savings Account.

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