Comment: Personal Retirement Savings Accounts (PRSAs) were introduced to provide a simple, mobile and straightforward method for providing pension benefits - primarily for those not in employer schemes, writes Ray McKenna.

New evidence shows that take-up of these products, despite significant marketing campaigns by leading insurers, is quite disappointing.

Certainly, the experience to date will not help to bridge the void between 50 per cent and the target 70 per cent pensions coverage that the Minister for Social and Family Affairs, Ms Coughlan, believes is desirable.

The main target - the employee of a small company or sole trader without an existing pension plan - is proving reluctant to sign up, despite the promotional hoopla.

Last week's release of figures showing that fewer than 3,500 have signed up shows the plan is not working.

We can expect those figures to rise as the September deadline for employer compulsory access approaches but the omens are not good.

The Pensions Board estimated that 70 per cent of workers over 30 years of age require supplementary pension cover if they are to maintain their pre-retirement standard of living.

The Government aims to increase private pensions coverage in line with this target.

At present, coverage stands at just over 50 per cent. Take-up so far of PRSAs is unlikely to make much of a dent in this figure.

From September 15th, 2003, employers who do not provide any form of pension provision for employees will be obliged to provide access for these employees to a standard PRSA.

To support employers and generally increase the awareness of PRSAs, Ms Coughlan recently launched a booklet entitled Personal Retirement Savings Accounts (PRSAs) - Employers' Obligation.

She also announced a national pensions awareness campaign, aimed at promoting the awareness of the need for greater private pension provision.

Currently, there are 49 approved products available from nine financial institutions. The range of products available is quite wide.

But choice can lead to confusion in what is meant to be a simplified route to providing pension benefits.

From our experience in KPMG, most major employers and certainly almost all multinational employers provide some form of pension coverage for employees.

These employers will only be affected in so far as a small group of people may be excluded - due to short service, etc.

Again our experience is that, where this is the case, most companies are mainly extending their existing pension plan to include all employees and few are affecting PRSAs.

This is predominantly due to the perception that PRSAs will bring additional administration and compliance as well as payroll issues for them.

However, these larger employers are probably not the main target audience for PRSAs. The smaller employers and sole traders are the key audience and most of these have not, as yet, adopted PRSAs.

The September 15th deadline, coupled with the tax efficiencies of pensions and Government media campaigns, may improve take-up and consequently affect pension coverage.

However, experience in Britain, where stakeholder pensions were launched a number of years ago, broadly aimed at the same market, has been very disappointing.

Ultimately, if PRSAs are not successful, Government may need to revisit ways of improving pension coverage, including consideration of mandatory pension provisions by employers.

Obviously, this is not desirable from an employer's point of view and, potentially, from a member's point of view, as mandatory pension provision may lead to a greater pension coverage but adversely affect the adequacy of pension provision.

Typically, where mandatory systems exist, the minimum required level of contributions by employers, which is usually inadequate in terms of income replacement, tends to become the norm for all.

Ray McKenna is a partner with KPMG's human capital division.