You can withdraw from it regularly to give yourself an income. When you die you can leave any remaining funds to your spouse/civil partner or other beneficiaries. The transfer of a matured pension fund into an ARF is an option for; holders of personal pension plans, proprietary directors, PRSA owners and also members of occupational schemes who have sufficient AVC contributions.
There are other conditions in place which determine the value which can be transferred to an ARF. These conditions centre on the risk that the retiree may withdraw too much too soon from the ARF and not having enough funds to cover their later retirement years. Before being able to purchase an ARF, it is a requirement that the individual has some other source of guaranteed pension income, this minimum level of income is €18,000.
If the minimum guaranteed income condition cannot be met, the individual may purchase an AMRF for €119,800.
If you are unsure if you qualify to invest your pension fund in an ARF please contact us to schedule a review of your retirement options.
Maintain Capital Value
The benefit of using an ARF is that your accumulated fund continues to be invested and grows tax free in capital value, after you retire.
Similar to when the pension investor needed an investment strategy while accumulating their pension fund up to retirement, another strategy is now required to continue to grow the pension fund while in retirement.
Recent changes to tax legislation have impacted the way ARF’s are taxed. Now, even if there is no drawdown of income from the ARF, a tax liability will be assessed each year on an assumed drawdown value.
The major benefit of an ARF over an annuity contract is the ability to transfer capital to an individual’s estate, after the death of the retiree. Unlike an annuity contract that ceases upon the death of the retiree (unless purchased with a guaranteed term), the balance of the ARF is passed on to the deceased retiree’s estate.
Depending on your pre retirement pension arrangements and your individual circumstances, your post retirement arrangements may include an ARF and an annuity contract.
In the past the ARF was seen as the capital preservation product and it still is when compared to annuities.
However revenue rules have now made ARF withdrawals a requirement. From 2010 the revenue will assume a drawdown of 5% of the asset value of the ARF, even if the withdrawal has not been made. Your tax liability will be based on this assumed drawdown. The national income drawdown has been increased from Budget 2011 to 5% of the asset value as of the valuation date Dec 31st.
It is therefore advisable to make a withdrawal of income to at least the assumed revenue percentage.
An ARF can invest in almost anything that a pension fund can invest in. Therefore the same investment criteria applied in pre-retirement pension investment can be carried forward, although risk levels may lower and it should be assumed that a level of income will need to be drawn down each year.