Even before Personal Retirement Savings Accounts have been approved, seller competition has become heated

The market for Personal Retirement Savings Accounts (PRSAs) will be a battle royal between the low-cost standard PRSA and more expensive non-standard versions, according to one potential provider of the new type of portable pension.

As the Pensions Board prepares to announce on Monday whether it has approved or rejected PRSA products submitted by the first wave of applicants, Ark Life, the life assurance wing of AIB, has accused its competitors of trying to roll back what the Pensions Board is trying to achieve.

Mr Brian Woods, finance director of Ark Life, believes the industry is set to shun the standard PRSA, where charges are capped at a low level, and promote their more lucrative non-standard versions instead. Ark Life intends to sell only standard PRSAs.

Standard PRSAs in effect carry the Pensions Board "kitemark", while non-standard PRSAs were introduced as a concession to the industry, Mr Woods says. It was thought that non-standard PRSAs would be a "minority sport" for banks and insurance companies, but now they look like dominating the field, he predicts.

Charges on standard PRSAs are capped at 5 per cent of the contributions made and a 1 per cent annual management fund.

Mr Dave Swanton, marketing director of Bank of Ireland Life, has indicated that charges on its products are likely to be 0.25 to 0.5 per cent higher on non-standard PRSAs. He said he could not speak for the rest of the industry.

An extra quarter of a point on an annual management charge could reduce a person's pension fund by almost €11,000, based on a €300 monthly contribution over 30 years, assuming growth of 6 per cent on the fund.

If non-standard PRSAs turn out to be 80 per cent of the market, Mr Woods says the Pensions Board could move to cap charges. A review is scheduled to take place in 2006.

The new pensions are likely to have a huge impact on the level of commissions paid to intermediaries, but as a tied agent of AIB, Ark Life does not sell through brokers. "The standard PRSA is a big threat to the current financial dynamics of distribution. The non-standard PRSA is a lifeline," says Mr Woods.

Under standard PRSAs, funds must be diversified. Market-specific funds such as a Japanese-only fund or an Irish-only fund are not allowed. However, Mr Woods believes other industry players will artificially limit the choice of funds on their standard PRSA to make it look inferior to their non-standard range of products.

"The industry is trying to roll back what the Pensions Board are trying to achieve, which is to simplify pensions and defuse the need for advice," he says.

"People should remember there is a strong commission bias behind the advice. It may be good advice, you may love Japan, but there is a bias," he adds.

EBS Building Society has also said that its "primary focus" will be on standard PRSAs. However, EBS has not ruled out selling non-standard PRSAs.