The Irish Financial Services Regulatory Authority (IFSRA) has warned consumers to be vigilant when purchasing Personal Retirement Savings Accounts (PRSAs), especially in relation to non-standard products.
The regulator's advice, which is contained within a two-page factsheet, comes as the companies sanctioned to sell PRSAs are increasingly questioning the success of the initiative.
PRSA providers have reported poor sales, highlighting the complexity of the products and the onerous bureaucracy they entail as factors inhibiting their appeal.
PRSAs were launched earlier this year as a means of filling a gap in pensions coverage in the Republic, and were billed as a simple, flexible alternative to existing pension structures.
Consumers have, however, failed to display much enthusiasm for them and the Irish Insurance Industry Federation has repeatedly highlighted the difficulties attached to marketing in the area.
At least one PRSA provider said yesterday that the guidelines were "unhelpful and unnecessary" and criticised IFSRA for formulating them without consulting industry.
IFSRA's guidance offers a description of the PRSA model and outlines the differences between standard and non-standard structures.
It concludes that a standard PRSA, whereby charges are capped and investments are limited to pooled funds, is likely to suit most people, and says consumers should beware of promises of better returns on non-standard products.The regulator suggests consumers ask for a full explanation of the differences between the two product types. It also urges people to beware of advice which recommends abandoning an existing pension plan in favour of a PRSA.
The regulator has also issued sales instructions to companies selling PRSAs. It has decided that a non-standard PRSA cannot be sold unless both seller and buyer declare in writing that all relevant information has been provided and risks highlighted.
"Beware of promises of better returns on non-standard PRSAs. Predicting investment performance is notoriously difficult," IFSRA warns.
A spokesman for Irish Life, the State's largest life assurance company, said that, while the firm was "reasonably happy" with the pace of PRSA sales so far, real progress in the area remained a challenge. "We don't find these guidelines helpful," he said.
Among its contentions Irish Life claims the IFSRA guidelines favour independent advisers over companies like itself which sell through closed channels.
Irish Life has sold about 1,000 PRSAs since launching both standard and non-standard versions a couple of months ago. Other providers have been less successful however, reporting sales in low double digits.
A spokesman for Friends First, which has built up a sales pipeline of about 60 PRSAs, said any guidelines that would aid the selling of the products would be welcome. The very fact that guidance was necessary suggested that the model was not working however, he added. Friends First is seeking a review of the area.
