Difficulty
After many years, the fragmented supplementary pension savings can be brought into pieces. A new flexible competition to the 3rd pillar has emerged, which will ultimately benefit the savers. And it’s not just any competition.
The challenger is the pan-European Personal Pension Product (PEPP) devised by the European Union. Thanks to Finax, the Irish are among the first Europeans who can benefit from it via the European Pension investment product.
While having many similarities in both the regulatory and fundamental sense, there are multiple differences which may influence both the height and availability of your pension.
Secure a comfortable future and take advantage of the European pension benefits
Which Pension Solution to Opt for?
Let’s start with the similarities first. Under the current legal provisions, personal contributions to both PEPP and PRSA qualify for an income tax relief under the same conditions.
Therefore, the tax relief is subject to a cap as a percentage of your total earnings based on your age and to the €115,000 income income cap. Furthermore, the relief is given at the contributor’s marginal tax rate (the highest tax bracket you’re currently in).
Moving on to fees, both PEPP and standard PRSA products have a maximum fund charge that may be imposed on the customer by the provider. This does not apply to non-standard PRSAs. Additionally, PRSA products may involve contribution charges.
If your employer contributes to your personal pension savings, their contributions are exempt from Benefit-in-Kind (BIK) up to 100% of the employee's emoluments in the year. Any excess is taxed as BIK. Employer contributions are deductible for the employer only up to this employer limit.
What makes the European Pension different?
Here is a summary of aspects that you may want to consider when assessing whether a PEPP product is right for you:
- PEPP is fully transferable and portable across the entire EU. You may switch between any provider in any EU country, you may contribute to it in any EU country, you may receive employer contributions in any EU country, and you may draw from it in any EU country. This flexibility is especially important if you are a mobile worker.
- Fully digital and easy to set up. Everything can be done from the comfort of your home in under 10 minutes either on web or in the Finax mobile app.
- Only one low capped fee of only 0.9% p.a. including VAT. There are no additional contribution or performance charges.
- Unfortunately, funds allocated to a PEPP cannot be transferred to other pension products in Ireland. Therefore, you cannot transfer funds from PEPP to a PRSA.
Lucrative payout phase. Your money continues to grow even after retirement. The 60% equity to 40% bonds allocation ratio provides enough stability for the beneficiary while allowing for wealth to continue accumulating even after retiring, making increasing your pension throughout the retirement a possible option.
PEPP results
The most important factor when choosing a financial product is the potential result, in this case the return on your investment and the final sum your pension shall be drawn from.
Therefore, let’s look at the returns of the largest PRSA funds in Ireland on multiple time horizons.
For comparison, we also list the modelled performance of the Finax 100/0 and 80/20 portfolios, both of which form the investment strategy of the European Pension’s saving phase, and the Finax 60/40 portfolio, which constitutes the European Pension’s payout phase in phased drawdowns.
Investing is associated with risk. Past performance is not a guarantee of future returns, and the investment may result in a loss. Learn about the risks you take when investing. All information related to the historical performance of the Finax portfolios is modelled and generated by data back-testing, the method is described in How we model the historical performance of portfolios.
How would the fees impact my future pension?
To highlight the impact of fees, let’s set all the things equal, except for the fees itself.
For this purpose, we assumed a gross before-fee portfolio return of 8% per year during the savings phase for both solution). The returns used in the calculations are illustrative, and they neither account for the historical performance of the investment instruments nor forecast future returns.
Except for minor differences, all products currently offer passive investing via index funds, reflecting the performance of global equity markets (e.g., the MSCI World or MSCI All Countries World indices).
By assigning equal returns to all products, we can highlight the impact of fees. For both cases, let’s assume regular monthly €200 deposits.
The table above clearly shows that the height of fees your provider charges you, should not be neglected. Due to the compounding effect, even a seemingly small difference at the beginning has a big impact on the final result, sometimes as big as 70 thousand euros.
One should note, that while these numbers might seem abstract, they will impact your quality of life once you retire.
What Conclusions to Draw from this?
There is no single “perfect” pension product that suits everyone in all situations. Both PRSA and PEPP are legitimate, tax-efficient ways to build your retirement savings in Ireland, and under current rules they stand on equal footing when it comes to tax relief and employer contributions. The real differences emerge when you look at the costs, the flexibility, and how well the product fits your lifestyle.
PRSAs remain a familiar and well-established solution, particularly for people who expect to live and work in Ireland for their entire career and value the ability to transfer their pension between Irish products. However, as the calculations clearly show, fees matter enormously over the long term. Even small differences compound into tens of thousands of euros, directly affecting your standard of living in retirement.
PEPP brings something fundamentally new to the table. Its low, transparent fee structure, fully digital setup, and EU-wide portability make it especially attractive for people who want simplicity, efficiency, and control. For mobile workers, international professionals, or anyone who may move between EU countries during their career, PEPP removes a major source of friction and uncertainty from long-term pension planning. Your pension travels with you, regardless of where you work or retire.
Secure a comfortable future and take advantage of the European pension benefits
Importantly, choosing PEPP does not mean abandoning a PRSA. Even if you already have a PRSA, PEPP can serve as a powerful addition to your pension strategy. Using both can help you diversify your retirement savings across providers, fee structures, and payout options, while still benefiting from the same tax incentives. In many cases, combining the two may lead to a higher and more resilient pension outcome than relying on a single product alone.
Ultimately, the best pension is the one that aligns with your career path, mobility, and long-term goals. Whether you choose PRSA, PEPP, or a combination of both, starting early, keeping costs low, and staying invested for the long term will have a far greater impact on your pension than the label on the product itself.
Frequently Asked Questions About PEPP vs PRSA in Ireland
1. What is the difference between PEPP and PRSA in Ireland?
Both offer the same income tax relief on contributions at your marginal rate, capped by age and the €115,000 income limit. The key differences are fees and flexibility. PEPP charges a maximum of 0.9% p.a. with no contribution or performance charges. PRSA fees vary by provider and can be significantly higher, which compounds into tens of thousands of euros less at retirement. You can learn more about fees and pricing at Finax.
2. Can I have both a PEPP and a PRSA at the same time in Ireland?
Yes. PEPP and PRSA are not mutually exclusive. Combining both can diversify your retirement savings across different fee structures and payout options while still benefiting from the same tax relief. Note that funds from PEPP cannot be transferred into a PRSA. See how tax relief works at Finax Ireland.
3. Is PEPP better than a PRSA for pension savings in Ireland?
It depends on your situation. For mobile workers or anyone who may move between EU countries, PEPP is the stronger option — fully portable, fully digital and cheaper. For those who plan to stay in Ireland for their entire career and want to transfer between Irish pension products, a PRSA may suit better. In most cases the maths favours PEPP due to lower fees compounding over decades. Read more about how investing works at Finax.
In the event of any questions or suggestions, please contact us at [email protected] or telephonically at +421 232 477 760.
